Don’t Tell Anyone, But “Call of Duty 4 Blackout mode is Awesome” = Money
This post has nothing to do with warrants or arbitrage, my usual genre. It’s a trade idea stolen straight from my 17 year old.
But first, entertaining backstory.
A few weeks ago my wife’s cousin and his family were visiting from Wyoming. I brought up the world of business, as I’m inclined to do, in the conversation.
I was telling my Harvard graduate lawyer cousin about Fortnite. That’s a Wikipedia link describing the game if you’ve never heard of it.
Fortnite Battle Royale has become a MAJOR thing with the twenty-something, teenage and younger set. Over 125 million people play the game worldwide. And, yours truly is one of them. (Though sadly not a teenager anymore.)
My son is an athlete and a gamer. It’s apparently necessary to be a gamer if you grow up an athlete these days. He’s pretty good at Fortnite, and I tag along.
We have 300 wins between us and my 14 year old daughter (also an athlete and gamer). My son’s pretty good in the game.
If totally lost with the 300 wins stat, just ask your kid how many Fortnite wins they have. We were top 500 duos in the world on Xbox for a short time this summer. So…my point, I know a little about the game. (Of course there is a next level of professionals who play the game for big money, but that’s a story for another story.)
Some of you at this point are saying “who gives a crap”, especially if you’re older and / or not connected to the video game craze. The craze, by the way, which is giving birth to an entirely new “esports” industry that is growing like wildfire, and is in the very early stages!
Which brings me back to my conversation with the Harvard lawyer cousin. I was explaining the Fortnite game, which is FREE to play, and how the company is reportedly making hundreds of millions a month. (From what I understand they’ve made over a billion dollars from 2017 to 2018, not bad).
Cousin: “But if it’s free, how do they make money?”
Me: “Well, they sell skins, and dances, and emotes in the game.” Cousin: “But if it’s free, why would I buy those things, and what is a skin?”
Me: “It’s like a costume that your player wears, and you can dance on other players after you beat them to show off.”
Cousin: “I don’t understand, why you would buy that stuff, doesn’t make sense”
Me: “Think of it like a car, you can buy a really cheap car and it still gets you places, but people buy really expensive cars. Or, just think of it like going to the movies, it’s fun / entertaining…it’s the same with the skins and dances, it’s fun!”
Cousin’s wife: “I haven’t been to a movie in years.”
Me: “Are you kidding me, you guys are in town doing college visits for your kids and visiting family, and SOMEHOW you (cousin) found time to go to a FOUNTAIN PEN CONVENTION and spend money both of those days.”
OK, I actually didn’t say that, I just got up to get a drink. But, he HAD gone to a FOUNTAIN PEN CONVENTION twice during the visit. So you don’t understand spending money on skins and dances in Fortnite, but you spend money on FOUNTAIN PENS. Maybe it’s me, but really?
Sorry cousin…he doesn’t read my stuff anyhow, so no worries.
Back to biznazz. Recap. 1. Fortnite is a big deal. It has made a ton of money with something called Battle Royale. 2. That’s the FREE version of the game which is a free-for-all battle. 100 players fight each other in a smaller and smaller area as a storm closes in, and one player eventually wins.
If you don’t get “2” in the paragraph above, don’t worry about it. Focus on “1”. Fortnite has made a TON of money in just a little over a year.
OK dude, got it, how do I make money? What’s the deal.
There is another game that’s popular with the gamer set called “Call of Duty.” The game has been a big hit for many years through many versions for Activision Blizzard (ATVI). (BTW, an aside, I’ve been using the Tradingview charting software to film several trading courses for another company, very cool software, and the courses are something I hope to share in the near future. Transparency, the link is to an ATVI chart and is also an affiliate link.)
The newest version of Call of Duty is set to be released in October, but the beta versions are being released now. There has been a lot of hype about the new release and on Monday the Playstation beta (for the Blackout mode, see below) was released.
Many gamers record their gameplay and put it on a service called Twitch (owned by Amazon, smart guys over there). Other gamers can watch the gameplay live or recorded (yes, they do that, and they do it a lot).
Beta players of the new Call of Duty have been posting their games. And my son, the gamer, has been watching the videos. And yesterday my son tells me I should buy Activision.
See, for weeks my son has been telling me about a new playing mode in the new Call of Duty (CoD4, btw) called “Blackout”. Now I thought that meant it would be a game mode played in the dark, or that all the characters would be in black. I’m an idiot.
Blackout mode is the Battle Royale of Fortnite, but with all of the Call of Duty characters, and a lot of the classic Call of Duty maps.
And, according to my son, who also happens to be a pretty good Call of Duty player, it looks (pay attention, this is the important part) AWESOME. (The fact that the Battle Royale mode is in this new release is not new news. The gaming community has known this for months. The fact that it is AWESOME is.)
So, where are we now in the “how do I make money on this” phase. After the Playstation beta came out on Monday the stock has had an initial jump. It went from the low $70s to just over $80 where it is now. Nice move, but buying it before the beta release without knowing if the Blackout version was any good would have been a crap shoot.
The next beta release for the Blackout mode is for the Xbox, and comes out on Friday (I know where my son will be this weekend). And then the actual game comes out on October 12th for public sale.
Here’s my take. There will likely be another bump in the stock after the Xbox beta release for Blackout this Friday. I think the stock is very likely to trend up to $100 (or very close) before the release date on October 12th. I think the game is going to be THE HIT video game of the year. And that it will crush sales of all other Call of Duty titles.
I’m either long the stock as you’re reading this, or will be soon. (Looking for my exact entry point and deciding if I want to be long options / stock, likely a combo of the two.)
Remember, Fortnite made a billion dollars in one year without a previously established base of players. CoD already has a base that is hungry for a new game even without the Blackout battle royale mode. Think about it.
And I believe the market hasn’t yet priced in a major hit for Activision for the new title.
(If you want a little more “history” on the Battle Royale phenomenon that has erupted in the past year and a half, you can read about the first Battle Royale game from PUBG here.)
Disclaimer: Nothing in this article is a recommendation to buy, sell, trade, or invest in any stock, option, baseball card, or item you might pick up for resale at a yard sale. I am NOT a broker or investment advisor, and you should do your own research, consult whoever makes you feel good and sends you a birthday card, AND is also an investment advisor with some company that regularly advertises on CNBC (most likely). And as I said in the article above, I am not long the stock this second, as I write this, but may be by the time you read this and definitely plan to be over the next few months. I may (WILL) also sell the stock when and if I make money in it, or if I lose money and my stop is triggered. Bottom line, I am not suggesting, or recommending you do anything, AND I will likely be long, no position, and possibly short at some point, all and any stocks mentioned in this article.