A couple months ago I opened a position in Activision Blizzard (ATVI). Blizzard is the Pixar of the gaming industry. All of their games are blockbusters. The most notable title World of Warcraft collects $15/month from their millions and millions of players.
I got interested in the stock after picking up Star Craft 2, another blockbuster game from them. I knew that game was going to sell better than expected. I had been watching pro Star Craft 2 tournaments that were run off the game’s beta for a few months. At that point the game was already getting a ton of attention from gamers.
I wanted to bet on Blizzard. Blizzard was a private company before 2008, but merged with Activision December 2007. So I can buy Blizzard stock now… or really I have to buy the whole company. And although Blizzard is only a part of the company now, Activision is no slouch either with hits like Call of Duty and Guitar Hero. I’m bullish on videogames. This looks like a good play.
One thing that will not be baked into the stock price is the success of Star Craft 2 as an esport. There is a lot of upside here.
The original Star Craft (and Brood War expansion) are huge in South Korea, where there are multiple TV stations devoted solely to casting Star Craft games. Players are licensed by the government. While it’s been huge in Korea, it’s only been a relatively small movement in the rest of the world. However, since Star Craft 2 has come out, the rest of the world is getting on board with Star Craft as an esport and (more importantly) as a spectator sport.
Star Craft 2 is slowly taking over social video sites. Channels like Husky Starcraft and HD Starcraft have over 300,000 subscribers. The livestreams of Star Craft 2 players (good list here provided by Team Liquid) are often the most streamed channels on live streaming sites like UStream and Justin.TV. The game has an audience.
Blizzard also already collects royalty fees from companies running Star Craft 2 tournaments, such as the GomTV GSL in South Korea and the Major League Gaming events in the United States. These royalty fees are super small right now, and not a major source of revenue for a $16 Billion company. The business model now is the use the tournaments as a way to get exposure for the games and keep them relevant between production cycles. However, I think there is a large business in broadcasting these esport games in the future. Activision Blizzard will have the experience to take advantage of it.