Lately, I have noticed an upsurge in questions about WWII from kids in their teens, and twenties, usually men.
Over the past 50 years, I have visited virtually every WWII battlefield, have read hundreds of books on the topic, and rank as an armchair general in my own right.
I also have has the pleasure of meeting the veterans of many armies, from a German ME 262 jet pilot, to my own Uncle Mitch, the first Medal of Honor winner of WWII.
The question for me always was, why are kids born a half century after the war suddenly interested in the subject. The answer is always the same: they heard about it on a video game. Gaming, in fact, is coming to shape these kids' understanding of history.
E-gaming is not typically pigeonholed as a highly attractive stock on Wall Street. But in 2018, the e-gaming phenomenon emphatically has legs.
People are spending more time playing video games globally with an accelerating pace.
The e-gaming sector is a far larger chunk of American economy that you would imagine.
Many American children under the age of 18 play video games for nearly 20 hours a week. This social abnormality has reached an extreme tipping point, where 10% of children are classified as obsessively addicted to these consoles.
The lucky firm procuring these satisfying yields are the video game producer, top dog Activision (ATVI).
Unzipping their quarterly data, investors can quickly grasp the vibrant breadth of this industry.
The most salient pillar of success is total net audience, which printed $385 million MAU/quarter-an increase of 1 million users from Q3 2017.
The business is split into 3 different segments: Activision along with subsidiaries Blizzard and King, which Activison bought in recent years. All are contributing unique gaming franchises which are immensely profitable.
Activision checked in at $1.33 billion of revenue for the quarter. Blizzard ratcheted up to $599 million, and King was on Blizzard's tail with $516 million.
The bread and butter of Activision is the gaming classic Call of Duty: World War II, which was the highest global grossing game in 2017. This franchise has been ranked #1 in the industry for eight of the last nine years.
Along with many brick and mortar businesses, e-gaming is stampeding into the online digital world. The industry is migrating in a consumer-led surge to full-game downloads instead of boxed purchases in stores.
This monetization method connects the gaming companies adjacent to the consumer with tightly bound synergies that cut out the middleman, Gamestop Corp (GME).
The skyward propulsion was also partially attributed to Activision's Blizzard and King upping their overall "daily time spent per user", exceeding 50 minutes. Daily usage per day is starting to reflect that of Facebook (FB), which is a mighty feat.
Activision capped off the most successful year in history, with a total operating income of over $1 billion and operating margin of over 38%.
Their pipeline includes World of Warcraft's Battle for Azeroth, expected to be released this summer.
Guidance was quite impressive, and Activision shelled out two blueprints depicting their plans to gather a head of steam.
The most profitable business is steered predominantly by Call of Duty's Live Ops package.
What are Live Ops? They are in-game purchases by the user. This has become the new normal in gaming, where players must buy items in order to stay ahead of the curve.
This method has proved extremely popular while pushing up the ROI/user.
The Live-Ops manifest in 3 forms:
Gacha - Popularized by Japanese capsule toy vending machines, the appeal of paying virtual currency for a chance to get an ultra-rare item has proven to be a sticky feature.
The objective is performance progress. Gamers are offered free or discounted gachas during the initial stages but must pay for higher tiered gacha that in return represent a higher-level score.
Online Competition - This includes competitive structures such as guilds, leagues, playoffs or leader-boards that will boost the retention rate. The core idea is exclusive competition with unique rewards.
One-time Events - Time sensitive events corral gamers into an exclusive venue, creating a forced spending environment to conflate spending with winning.
In-game offerings have been such a hit that the feature crossed the $1 billion threshold in Q4 2017, which comprised about 25% of total quarterly revenue.
Activision truly has the highest-quality downloadable content in 2017, including Zombies Chronicles for Call of Duty: Black Ops III, the top add-on service of the year for PlayStation.
Constructing stunning Live Ops features are a challenge for game studios, because Live Ops teams must build database servers that scale with the involvement of millions of hardcore gamers. Harmonizing these functions is a nightmare, but is highly effective if successful.
After Live Ops, the second stage of the blueprint is mobile execution. Mobile gaming has not been scaled to the extent of the PC and gaming console market. The mobile market is still in its infancy and gaming studios can capture the immense growth potential, especially in Asia.
Technology has progressed to the degree where Activision is able to triumphantly consummate this strategy. These two great initiatives will spur Activision to extreme heights.
The wild card is the Overwatch League that commenced late last year and is in its incubation stage. Overwatch is a new global e-gaming league that is televised in a traditional sporting-league format. The league reached 10 million unique viewers and almost 300,000 average viewer/minute in the first week.
The follow through, post week 1, was also exceptional, with viewership stabilized. The audience can access Amazon's Twitch platform to view these contests.
Activision has made a calculated bet that the "average joe" gamer will want to watch world-class caliber gamers perform as a spectator sport.
Activision plans to sell new expansion teams to an array of global cities, and if gaming maintains its appeal to the global youth, the league could potentially rival one of the physical sporting leagues in the United States. And yes, Activision intends to weave in its add-on features to these live encounters.
If you are keen on Activision's (ATVI) competitors, who also run healthy gaming franchises of their own, then have a look at Take-Two Interactive (TTWO), who hawk their legendary game, Grand Theft Auto or EA Sports- held up by the NFL Madden and FIFA soccer labels.
In short, Activison looks like a "BUY" here, and the recent correction has given us the gift of a fabulous entry point.
To visit Activision's website, please click here.
