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We are in the midst of a history-making entertainment revolution. It is a trend into which Silicon Valley is investing billions, which is destined to be worth trillions.
Over the past 30 years, video games have been slowly evolving from the simple, twitchy interactivity of "Pong" and "Space Invaders" to immersive online platforms where users can interact in real time, teaming up to overcome challenges and compete with each other.
This opened up two major developments. The first is what we now refer to as "microtransactions," where virtual goods, like costumes for digital personas (called "avatars"), are sold in virtual storefronts for real money. According to Jefferies analyst Andrew Uerkwitz, people spend over $80 billion a year on video game avatars globally.
The second is the formation of large, networked communities of users who engage with each other socially through the game platforms. This user base represents a huge audience for all kinds of interactive entertainment experiences, and it didn't take long for companies to take notice of this untapped market.
Nowadays, a lot of these platforms really push that social engagement side of things, existing as virtual venues where users can make their own content, sell and buy things, and participate in events like virtual concerts.
Let me give you an example of just how far we've come - and we'll talk about the best stock to buy, too...
About a year ago, in November 2020, the musician Lil Nas X gave a concert on an online game creation platform called "Roblox." The game's developers built an avatar and a virtual performance space for him, streamed in the audio, and opened it up for all its users to attend. It attracted no less than 33 million views. To put things in perspective, the world's largest stadiums tend to only hold just over 100,000 people, and none are even as large as 200,000.
While Roblox Corp. (NYSE: RBLX) didn't report exact sales numbers, the global head of music for Roblox, Jon Vlassopulos, told interviewers that the sales of digital merchandise from the event were reportedly "creeping toward eight figures" by the end of the weekend.
This is no fad - it's the multitrillion-dollar future of entertainment, and whoever gets into this emerging field now is going to reap a huge reward in the next several years.
There's Real Cash in the Metaverse
Here's where all this is going. Eventually, the online component of these video game platforms is going to get combined with two other emerging technologies - virtual reality (VR) and augmented reality (AR) - allowing us to overlay networked digital experiences onto the real world.
This sounds like science fiction, but it's not. It's becoming reality as we speak. Facebook's founder and CEO Mark Zuckerberg just renamed his company to Meta Platforms Inc. precisely because he believes the metaverse is the next big frontier in tech.
Imagine going on a walk. Today, you would simply see a shop window with some mannequins on display. In the metaverse, you would have your AR glasses connect to the store's platform and show you an animated, constantly updated display of the outlet's latest offerings.
The metaverse also promises to allow us to experience visiting distant places from the comfort of our living rooms, to improve safety by making traffic signs more visible, and much more.
There are dozens of tech firms in the metaverse space already, but the top 12 firms alone now sport combined market caps of roughly $11.5 trillion dollars.
One of the early leaders is Epic Games, which makes the popular "Fortnite" video game. They raised $1 billion to support the firm's long-term vision of creating an immersive metaverse world.
But as much as I respect Epic and Roblox, they aren't what I want to tell you about. The firm I have in mind has an inside track, and their payment systems and gaming sales are an unstoppable, high-margin combination.
That firm is Apple Inc. (NASDAQ: AAPL), which doesn't make video games but is huge in the gaming world for its own reasons.
The Best Name in Games
Apple's iPhones and iPads have been wildly successful as gaming systems. Apple makes a profit off each piece of hardware and then takes a 15% to 30% cut of all video game sales on the Apple App Store.
In fact, in the fiscal year 2019, Apple made $8.5 billion in profits from gaming. That's more than the gaming profits of Microsoft Corp. (NASDAQ: MSFT), Sony Group Corp. (NYSE: SONY), Nintendo Co. Ltd. (OTC: NTDOY) - the makers of the Xbox, PlayStation, and Switch gaming consoles - as well as giant video game developer Activision Blizzard Inc. (NASDAQ: ATVI) all combined.
In the metaverse, folks will be able to buy and sell all manner of goods and services, even paying within the virtual world, using something like Apple Pay.
Users also will be able to buy all manner of products for their avatars. Selling these items within "games" is already big business, as I said earlier.
Currently, Apple takes a 15% to 30% cut of every purchase of an App Store product - as well as of any in-app purchase. That gave Apple a huge amount of money from game and avatar purchases, money that Epic wanted to keep for itself.
And now that these video games are beginning to merge with AR and VR tech to become the metaverse, it means that Apple is set to become a major toll taker.
In its Oct. 28 earnings report, Apple reported $83.4 billion in revenue, a record for the September quarter, and up 29% from the year before. Of that, $18.28 billion were from services.
The only division of Apple that did better was the iPhone, which brought in $38.87 billion in revenue, up 47% from the prior year.
Now, Apple's per-share earnings recently doubled. If we cut that back to 36% to be conservative, we'd see a double in two years, with a strong chance that stock price would follow soon after.
Cryptocurrency, no doubt, will be essential to making the metaverse "tick" - and it'll have impacts far beyond that. The real world is in a crypto frenzy right now; Bitcoin and Ethereum hit all-time highs this past week. And yet millions of American investors don't own any crypto at all.
We arranged to have one of America's first Bitcoin millionaires in for a "summit" meeting to go over everything new crypto investors need to know, from how to get started to his latest Bitcoin price predictions.
Best of all, this crypto millionaire is naming two tiny cryptos he believes will perform 10X better than Bitcoin in the year ahead. Go here to access the summit recording.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.