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Activision Blizzard Stock Gains on Unprecedented Video-Gaming Deal

Josh Enomoto

Nothing in the markets can be taken for granted. But if you’re looking for sectors close to a sure thing, your best bets are blockchain, e-commerce and video games. Activision Blizzard (NASDAQ:ATVI) investors quickly found that out recently when ATVI stock shot up more than 3%.

Unlike what prior generations have witnessed, video games no longer represent solely a personal hobby. It can be that, of course, but today, video games have taken on a much more competitive outlook. Thanks to sector trends such as e-tournaments, you can’t call “professional gaming” an oxymoron anymore.

If you’re so inclined, check out Diply.com’s list of famous pro-gamers and their annual earnings. By playing and being the best at titles such as Starcraft or DOTA 2, top competitors can earn half a million dollars or more. Let that sink in the next time your child begs you for the latest console from Sony (NYSE:SNE) and Microsoft (NASDAQ:MSFT).

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It’s this context that allows gaming outsiders to make sense of ATVI stock and its recent resurgence. On Tuesday, Walt Disney’s (NYSE:DIS) ESPN signed a broadcasting deal with Activision. Specifically, ESPN will provide live coverage of Activision Entertainment’s Overwatch League, which is a wildly popular esports tournament.

According to CNBC, this is the biggest-ever deal for Activision Entertainment. But that’s not the most significant factor driving ATVI stock. ESPN is committed to delivering gaming content to their audience, and therefore, key Overwatch episodes will air in prime time. Moreover, Overwatch’s season finale will air on Disney’s flagship channel ABC.

I can’t stress this enough: video gaming has gone mainstream, and every available indicator suggests the trend will only accelerate. If you haven’t thought about buying ATVI stock, you may want to do so now.

ATVI Stock Enjoys Perpetual Tailwinds

I could ramble on for days about the ESPN deal’s significance for Activision Entertainment. For starters, the deal symbolizes a coup d’état against fierce rival Electronic Arts (NASDAQ:EA). Electronic Arts is famous within gaming circles for its EA Sports line.

Featuring incredibly popular titles such as Madden, NBA Live, and FIFA, gamers regard EA as the leader in virtual-sports entertainment. While individual complaints may arise about gameplay nuances, one crucial element keeps gamers — even the complainers — coming back for more: a near monopoly on sports licensing.

Due to the deals that they’ve cut with professional sports leagues around the world, no one else but EA can offer a legitimate gaming experience. This doesn’t prevent rivals from developing their own football or soccer games. However, they’ll have to use generic players, teams, and tournaments.

That takes away from the fantasy element, and so EA is the sports-gaming world’s alpha dog. It’s the natural choice for a television deal, yet Activision snuck in the victory.

The other factor boosting ATVI stock is that sports-themed video games are actually threatening their real-life counterparts. Worldwide esports league revenues are growing at an average 50% rate since 2012. By the end of this year, industry experts predict that total esports tournament revenues will hit $906 million.

Over the next three years, esports sales are expected grow an average of 22% annually, eventually hitting $1.65 billion in 2021. To put that into perspective, stock-car racing league NASCAR generates around $3 billion in revenue.

But as I mentioned in my write-up for International Speedway (NASDAQ:ISCA), NASCAR is a failing sport. On the other hand, esports is on its way up. Therefore, it’s not inconceivable that in the not-too-distant future, NASCAR gaming tournaments will be more popular than real NASCAR.

Video Games Are No Fluke

With any radically different industry, traditional and conservative investors have fears about long-term viability. This is perfectly understandable, especially because ATVI stock has admittedly been choppy this year. But if the raw numbers didn’t convince you, perhaps a paradigm shift in society will.

Last month, I wrote an InvestorPlace article about social-network company Huya (NYSE:HUYA). Primarily, it live streams video game competitions. And yes, it’s exactly what it sounds like: people watching other people play video games, and enjoying every minute of it.

Before you criticize this phenomenon as a “Chinese thing,” bear in mind that this concept is repeated everywhere. Some of the most popular YouTube channels feature pro-gamers doing their thing. Why this is the case requires another article or five. For our purposes, it’s suffice to know that it’s a legitimate phenomenon.

I think it’s worth repeating that ESPN, which prides itself in broadcasting real sports, has gladly transitioned to esports.

For the older demographic, I probably sound as if I’m speaking Klingon. However you feel, don’t dismiss ATVI stock, or the video-gaming sector, as a fluke. In my opinion, we’ve only scratched the surface.

As of this writing, Josh Enomoto is long SNE.

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