In yesterday’s essay, we talked about an enormous culture shift and the mass adoption of video games. And that this shift is happening right now.
Today I want to show you how much money is involved.
And how much investors stand to profit…
Over the past year, a new game called Fortnite has taken the world by storm.
The game is based on a relatively new game type called battle royale. 100 players fight in a free-for-all to be the last man standing.
Fortnite Battle Royale went from idea to launch in under twelve weeks.
It took even less time for the game to find huge success.
On the day it launched into early access in July 2017, it had one million players. Within two weeks, it had amassed 10 million unique users.
Currently – just over a year after launch – the game has over 125 million players. This makes it the second-most popular video game of all time.
The unique and addictive game-play of Fortnite has taken over players’ lives:
- More than 30% of Fortnite players have skipped school to play, and 20% have skipped work.
- NHL players are so addicted to the game that some coaches want to ban it while the team is on the road.
- Parents are hiring Fortnite coaches to help their kids win. Says one parent: “It’s like soccer lessons for your kids.”
- People are leaving secondary education and promising careers behind to play Fortnite professionally.
If Fortnite were a website, it would be one of the top five in the United States.
That’s how fast and widespread the culture shift into video games is.
Living the Livestream: Players Making Millions Off of Fortnite
One of the students who decided to forego college is Tyler “Ninja” Blevins.
After graduating from high school, he decided to become a professional gamer.
He now live-streams his Fortnite game-play on Twitch. It’s a site where people watch others play games, for 6-8 hours a day.
His combination of personality and skill has caused subscribers to flock to him by the thousands.
Gaming is his full-time job.
Ninja makes money from ads, subscription fees, merchandise, and sponsorships. He even gets donations (his largest to-date is $40,000).
It’s been estimated that he makes about $500,000 a month…
But in interviews, he suggests that he makes closer to seven figures every month.
In September 2018, he took a two-day break in order to participate in a charity tournament. He won the tournament – and $1 million for the charity of his choice. But it cost him more than $100,000 a month in lost subscribers.
Ninja also made history in September 2018…
He was the first video game celebrity to get on the cover of ESPN magazine.
Tyler “Ninja” Blevins isn’t alone as a celebrity digital athlete. Tens of millions of people pay to watch other people play Fortnite.
In five months after its launch, the game had received 1 billion views on YouTube. A recent tournament had over 42 million views.
A Billion-Dollar Gamble… On Dance Moves
But here’s the thing: Epic Games (the developer of Fortnite) is giving away the full version of the battle royale game for free.
They made a major bet that they could make more money from in-game items. We’re talking things like costumes, cool-looking weapons, and “battle passes.”
Buying a battle passes unlocks certain content. For example, it provides limited weekly challenges, player skins, dances, and harvesting tools.
These extras make Epic Games a lot more money than they would have made from just selling the game.
The results so far have been… staggering.
In its first 200 days on Apple’s App Store, Fortnite brought in $300 million (it was only released on the Android platform two months ago).
And it continues to rake in enormous sums of money for Epic Games.
Between January and May of 2018, Fortnite netted $1 billion in revenue.
The gamble is paying off at the player level, too:
- Nearly 70 percent of Fortnite players spend money on the platform.
- Those players that do spend money have spent an average of $85.
Multiply these two numbers together, and you end up with an average of about $60 spent by every Fortnite player.
PlayerUnknown’s Battlegrounds (PUBG) is Fortnite’s main competitor in the battle royale genre. It costs $30 to buy a PC copy of PUBG, as opposed to Fortnite, which is free to play.
But on average, each Fortnite player has already spent twice as much on Fortnite as it would have cost to buy PUBG!
A Game So Successful It’s Making Other Stocks Take Off
In 2012, Epic Games was valued at $825 million.
Bloomberg estimates that by the end of 2018, it could be worth more than $14 billion – nearly a 1,700% gain.
Fortnite’s epic success isn’t just giving its developer a boost… it’s making other stocks skyrocket as well.
There’s Funko (FNKO:NASDAQ), a company that makes tiny cartoonish action figures with oversized heads. They look like something you would find in a Happy Meal.
Since the company announced they’re making a line of Fortnite figures, the stock shot from $6 to a high of $31, as the chart below shows:
Another company, Turtle Beach (HEAR:NASDAQ), makes high-end gaming headsets that are marketed to give gamers a competitive advantage. They make almost half of all gaming headsets sold in North America.
In just under 8 months this year, the company’s stock rose from $2 to $32:
Here’s Turtle Beach’s CEO Juergen Stark explaining their stock’s rapid rise:
“Because ‘Fortnite’ is free, there’s this opportunity to buy peripherals,” he said. “Instead of spending $60 on a game, they can spend $60 on a headset.”
And then there’s Tencent, a massive Chinese media company. It snatched up 40% of Epic Games in 2012.
On paper, they’ve made more than $5 billion on their $330 million investment.
Tencent is a huge company that you must take note of… we’ll discuss them more tomorrow.
In the video game industry, Tencent is known as the kingmaker. It has the ability to turn a small game into a massive hit – which means boatloads of money for early investors.
No matter where you look, the massive culture shift towards video games is making huge sums of money.
Activision Blizzard is one of the biggest names in the world in gaming. Look at their performance over the past five years:
Just a handful of big games have driven the stock up nearly 800%.
The Next Fortnite Is Out There – Here’s Where to Find It
Even though there are massive gains to be made in video games, lots of investors are still not paying attention.
Maybe it’s because finding a good investment in the video game industry is really hard.
Start with a list of the couple hundred gaming companies in the world.
Then take out the ones that are already juggernauts, like Activision Blizzard and Electronic Arts. And take out the ones that have already taken off, like Turtle Beach – they don’t have the kind of upside we’re looking for.
Then remove all the private companies, like Epic Games, and the ones that are no longer independent, like Supercell.
Then remove the tiny ones that do not have the resources to actually make a full game (mid-size games can cost north of $10 million to make).
Then cross off the ones without experienced leadership and vital distribution partnerships.
And get rid of those that do not own a free-to-play game that can attract a high volume of users and get them to pay large amounts of money, like Fortnite can.
As you’ve seen, video gaming is a gold mine.
But you’ve got to know where to look for the gold.
Katusa Research has found a company that meets all of these vital criteria.
And you’ll be able to access the full report on it tomorrow.
And yes – we will reveal the name, ticker, and full analysis on the sector and company.
If this company hits their distribution milestones with their partner, their game is set to take off.
Just like Fortnite.
Regards,
Katusa Research
