There’s not a major sports league in the world today that wouldn’t love to undergo 138% growth in just four years.
We’re talking a total of 238 million viewers around the world for a “sport” that didn’t really hit its stride until 2010.
To cash in on this fast-growing trend, a group of owners from the National Football League, National Basketball Association, and Major League Baseball recently invested more than $140 million to start their own teams.
And if the players look more like computer geeks than athletes, it’s because that’s just what they are. In the new field of eSports, teams duel it out over computer games while fans watch online or at major arenas.
Here’s the thing. Though the field is new, it’s already ripe for disruption due to the immersive experience of virtual reality (VR).
Today, I’m going to reveal a VR firm that offers us a rare Convergence Economy play on the emerging lucrative mix of sports and digital tech.
From the Arcade to Madison Square Garden
If you’re a baby boomer like me, you no doubt recall the early days of video games. My friends and I often played Asteroids, Space Invaders or Pac Man over cocktails at our favorite watering hole.
By comparison to today’s deeply immersive, graphics-rich games, those titles seem to have come from the Stone Age.
That’s why modern hits like Call of Duty and World of Warcraft go after the desirable demographic group of millennials. These young people live online, stream movies rather than watch television, and seem to have their smartphones attached to their hands.
And the money is rolling in…
SuperData valued the eSports market at $748 million in 2015. The figure includes sponsorships, advertising, team prizes, fantasy sites, and ticket sales. By the end of 2018, SuperData says that figure will climb 154% – to $1.9 billion.
Roughly 52% of those sales will come from the United States and Canada. In other words, unlike most American pro sports eSports already is a global field with a lot of growth ahead.
Most viewers follow the field online. But live events also do well. Back in 2015, an eSports multiplayer battle sold out New York’s Madison Square Garden, which has more than 18,000 seats. Fans paid between $46 and $61 to attend.
No wonder all three major computer game publishers have launched competing eSports leagues.
Last week, computer game firm Activision Blizzard Inc. (Nasdaq: ATVI) drew attention from The Wall Street Journal. The paper reported that Activision’s Overwatch League has so far signed up seven owner groups that have put up $20 million each to start their own teams.
The paper said Blizzard expects the Overwatch League to field 28 teams. The company will share sales for advertising, merchandising, ticket sales, and broadcast rights with team owners.
So is Riot Games, the firm behind League of Legends that sold out Madison Square Garden. Chinese web giant Tencent Holdings Ltd. (OTC: TCEHY) bought a majority of Riot Games in 2011.
The move gave Tencent a big play on eSports growth in China. With China in the lead, the video game analysts at Newzoo estimate that Asian Pacific countries will be home to 44% of the global eSports audience.
In a case like this where many tech leaders are racing to get in on the action, I believe we can make more money by finding a great backend stock.
Even better, if the firm just happens to have the type of breakout tech that can disrupt a new field like eSports…
Inside the Game
And that’s why I think Facebook Inc. (Nasdaq: FB) is a great way to play the massive grow ahead for eSports. See, Facebook owns the Oculus Rift VR headset.
VR is one future of video gaming and eSports. Simply stated, VR allows users to “enter” a computer game with such a deeply immersive experience that they feel like they really are there.
This virtual world could also fashion a strong bond between players and their fans. After all, teams will battle it out wearing VR headsets while fans at home can join the action from the comfort of their couches using the same equipment that puts them in the center of the action.
VR is a great growth field in its own right. MarketsandMarkets says the sector will be worth $33.9 billion by 2022. During the period, growth will average 57.8% a year.
But there’s much more upside ahead for Facebook than just its VR headset. Turns out, the social networking leader also is becoming a go-to eSports outlet.
Facebook started in the field in the “early days” of mid-2015. At the time, sites like Reddit, Twitter, and YouTube were the eSports broadcasting leaders.
So, Facebook joined forces with Major League Gaming, an eSports network geared around pro events. At that time, Facebook was way back in the pack among eSports sites.
However, the Silicon Valley leader keeps picking up the pace…
In April, Facebook signed a deal with Team Dignitas, one of the field’s top teams. The next month, Team Zuckerberg joined forces with eSports league ESL to bring more than 5,550 hours of events and other fresh content to Facebook, including 1,500 of original programming.
ESL made the move so it could deepen its reach into its Facebook fans. Last year, ESL had more than 2 billion impressions and more than 200 million global Facebook users.
That pact brings up a key point behind why I believe Facebook will soon dominate the new gaming paradigm. Simply stated, no online, cable or TV network can match its user base and its Facebook Live streaming format.
1.94 Billion – and Rising
We’re talking 1.94 billion active monthly users at the end of the first quarter, up 17% from the year-ago period. Daily average users grew by 18% to 1.28 billion, a figure that is just shy of China’s 1.37 billion population.
Make no mistake, Facebook is a cash machine…
In the first quarter, sales rose 51% to $7.8 billion while diluted earnings per share climbed 73% to $1.04. The firm has $32 billion in cash on hand. The stock is trading around $164.50 and has a $480.58 billion market cap.
Pick up a few shares and you get one of the tech sector’s top stocks with year-to-date gains of 38%. That’s more than three times the S&P 500’s return over the same period.
Add it all up and you can see that Facebook is not just a great way to play the growth in eSports and the dawn of the VR era.
It’s also a stock you can count on to grow your portfolio over the long run as firms all over the world keep tapping the power of massive user base.
Paid-up members of Michael’s Nova-X Report research service have a “pure” eSports play in their portfolios – and they’ve made 84% on it in the less than two years they’ve held it.
And that’s far from the only play that’s burning up their bottom line. Nova-X readers are also sitting on gains of 102.8%, 107% 108.6%, and 72.39%.
And this year alone, they’ve closed out plays that made them gains of 264.79% and 213.92%.