Why Amazon Stock (Nasdaq: AMZN) Is Going to Score Big from Gaming

Invest in Amazon stock (Nasdaq: AMZN) today, and you're investing in many industries at once.

The world's largest online retailer has expanded beyond its humble beginnings as an online bookstore to become a seller of furniture, apparel, jewelry, groceries, original video content, Amazon-made devices, and more.


Customers playing Amazon games on Amazon Fire TV.

But the newest of Amazon's niches, the gaming industry, is ripe to deliver Amazon stock - and its investors - massive upside.

"These guys leave no stones unturned for the next dollar they can bring in," said Money Morning Defense & Tech Specialist Michael A. Robinson. "Amazon is constantly upselling, cross-selling, and looking for new products, and they're great at it."

You see, in 2004, the global video game market, which includes video game console hardware and software, and online, mobile and PC games, was valued at $10.3 billion. By 2013, it had climbed to $93 billion, and by 2015, it's projected to rise to $111 billion, according to research firm Gartner Inc.

The mobile gaming boom is even more impressive. Revenue there is expected to double from $13.2 billion to $22 billion in just two years, between 2013 and 2015.

"As mobile devices continue to grow, the mobile game category will show the biggest growth due to the entertainment value provided by games compared with other app categories," Gartner research director Brian Blau said. "Moving forward, game developers will need to constantly deliver compelling games as the growth of content and platform choices drives game players in divergent directions."

Here's a closer look at how Amazon's going to cash in on the gaming industry explosion...

AMZN's Expansion into Gaming

Amazon's expansion into the gaming industry began back in August 2012, when the company announced the addition of a gaming department, "Amazon Game Studios." It released a free-to-play social game called "Living Classics" shortly thereafter. On Nov. 1, 2012, the company released its first-ever Android-based mobile game called "Air Patriots," available through Amazon's app store and on Google Play.

But this year Amazon's trek into gaming really heated up...

On Feb. 5, Amazon announced it acquired Double Helix Games "as part of our ongoing commitment to build innovative games for customers." Double Helix is the result of a 2007 merger between two respected game development companies, The Collective Inc. ("Earthworm Jim") and Shiny Entertainment ("Star Wars Ep. III: Revenge of the Sith"). Double Helix produced the Xbox best seller "Killer Instinct" and many others. Amazon stated that the studio's game roster and future developments would receive AMZN's full support.

Then on April 2, Amazon debuted its Fire TV, a set-top box that comes with a gaming-friendly voice-controlled interface.

All year, AMZN has been building a roster of top-notch gaming industry employees, including Portal designer Kim Swift, Far Cry 2 creative director Clint Hocking, and others hailing from popular studios such as Valve, Activision, EA, Microsoft, Nintendo, Ubisoft, Square Enix, Blizzard, and more.

While the company doesn't yet have a large list of live video game titles, it's seen some success on the Amazon app store and Google Play. And yesterday, for the first time ever, AMZN launched a game on Apple's iTunes app store ("Sev Zero: Air Support"), according to TechCrunch.

But the biggest move to date came just two weeks ago. On Aug. 25, Amazon announced it bought Twitch Interactive Inc. - the world's largest gaming arena and the fourth-largest source of all U.S. web traffic - for $970 million. That makes Twitch AMZN's biggest acquisition of all time, followed by its 2009 purchase of online shoe retailer Zappos for $928 million.

And it was worth every penny.

You see, buying Twitch was the perfect complement to the rest of AMZN's expansion into the gaming industry. It gives the company a direct line to the eyeballs of the biggest gaming community in the world.

An average of 1 million users a month record themselves playing video games on Twitch. Users collectively watch 13 billion minutes of streamed games a month. And in July alone, 50 million unique viewers logged in to watch and comment on the videos.

That's 50 million rabid, game-loving potential customers that AMZN can sell its own gaming titles and devices to each month.

The profit potential is enormous, and it won't be long before Amazon stock - and its investors - reap the benefit.

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