There's not a major sports league in the world today that wouldn't love to undergo 138% growth in just four years.
We're talking a total of 238 million viewers around the world for a new kind of "sport" that didn't really hit its stride until 2010.
To cash in on this fast-growing trend, a group of owners from the National Football League, National Basketball Association, and Major League Baseball recently invested more than $140 million to start their own teams.
And if the players look more like computer geeks than athletes, it's because that's just what they are. In the new field of “e-sports,” teams duel it out over computer games while fans watch online or, believe it or not, at major arena-type venues like Madison Square Garden.
Here's the thing. Though the field is new, it's already ripe for disruption due to the richly immersive experience of virtual reality (VR).
Today, I'm going to reveal a VR firm that offers us a rare “Convergence Economy” play on the emerging lucrative mix of sports and digital tech.
Let's get started…
From the Arcade to Madison Square Garden
If you're a baby boomer like me, you no doubt recall the early days of video games. My friends and I often played “Asteroids,” “Space Invaders,” or “Pac-Man” over cocktails at our favorite watering hole.
By comparison to today's deeply immersive, graphics-rich games, those titles seem to have come from the Stone Age.
That's why modern hits like “Call of Duty” and “World of Warcraft” go after the desirable demographic group of millennials. These young people live online, stream movies rather than watch television, and seem to have their smartphones attached to their hands.
And the money is rolling in…
SuperData Research valued the e-sports market at $748 million in 2015. The figure includes sponsorships, advertising, team prizes, fantasy sites, and ticket sales. By the end of 2018, SuperData says that figure will climb 154% – to $1.9 billion.
Roughly 52% of those sales will come from the United States and Canada. In other words, unlike most American pro sports, e-sports already is a global field with a lot of growth ahead.
Most viewers follow the field online, but live events also do very well.
Back in 2015, an e-sports multiplayer battle sold out New York's Madison Square Garden, which has more than 18,000 seats. Fans paid between $46 and $61 to attend.
No wonder all three major computer game publishers have launched competing e-sports leagues.
Computer game firm Activision Blizzard Inc. (Nasdaq: ATVI) recently drew attention from The Wall Street Journal. The paper reported that Activision's Overwatch League has so far signed up seven owner groups that have put up $20 million each to start their own teams.
The paper said Blizzard expects the Overwatch League to field 28 teams. The company will share sales for advertising, merchandising, ticket sales, and broadcast rights with team owners.
Meantime, Electronic Arts Inc. (Nasdaq: EA) and Take-Two Interactive Software Inc. (Nasdaq: TTWO) are developing their own leagues, though data about their status is not yet public.
So is Riot Games, the firm behind “League of Legends” and the event that sold out Madison Square Garden. Chinese web giant Tencent Holdings Ltd. (OTCMKTS: TCEHY) bought a majority of Riot Games in 2011.
The move gave Tencent a big play on e-sports growth in China. With China in the lead, the video game analysts at Newzoo estimate that Asian Pacific countries will be home to 44% of the global e-sports audience.
In a case like this, where many tech leaders are racing to get in on the action, I believe we can make more money by finding a great back-end stock.
Even better, if the firm just happens to have the type of breakout tech that can disrupt a new field like e-sports…
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Get Your Head in the Game… and the Game on Your Head
And that's why I think Facebook Inc. (Nasdaq: FB) is a great way to play the massive growth ahead for e-sports. See, Facebook owns the Oculus Rift VR headset.
VR is one future of video gaming and e-sports. Simply stated, VR allows users to "enter" a computer game with such a deeply immersive experience that they feel like they really are there.
This virtual world could also fashion a strong bond between players and their fans. After all, teams will battle it out wearing VR headsets while fans at home can join the action from the comfort of their couches using the same equipment that puts them in the center of the action.
VR is a great growth field in its own right. MarketsandMarkets says the sector will be worth $33.9 billion by 2022. During the period, growth will average 57.8% a year.
But there's much more upside ahead for Facebook than just its VR headset. Turns out, the social network leader is also becoming a go-to e-sports outlet.
Facebook started in the field in the "early days" of mid-2015. At the time, sites like Reddit, Twitter, and YouTube were the e-sports broadcasting leaders.
So, Facebook joined forces with Major League Gaming, an e-sports network geared around pro events. At that time, Facebook was way back in the pack among e-sports sites.
However, the Silicon Valley leader keeps picking up the pace…
In April, Facebook signed a deal with Team Dignitas, one of the field's top teams. The next month, Team Zuckerberg joined forces with e-sports league ESL to bring more than 5,550 hours of events and other fresh content to Facebook, including 1,500 of original programming.
ESL made the move so it could deepen its reach into its Facebook fans. Last year, ESL had more than 2 billion impressions and more than 200 million global Facebook users.
That pact brings up a key point behind why I believe Facebook will soon dominate the new gaming paradigm. Simply stated, no online, cable, or TV network can match its user base and its Facebook Live streaming format.
Facebook Has 1.94 Billion Monthly Users… and Rising
We're talking 1.94 billion active monthly users at the end of the first quarter, up 17% from the same period last year. Daily average users grew by 18% to 1.28 billion, a figure that is just shy of China's 1.37 billion population.
Make no mistake, Facebook is a cash machine…
In the first quarter, sales rose 51% to $7.8 billion, while diluted earnings per share climbed 73% to $1.04. The firm has $32 billion in cash on hand. The stock is trading around $164.50 and has a $480.58 billion market cap.
Pick up a few shares and you get one of the tech sector's top stocks with year-to-date gains of 38%. That's more than three times the S&P 500's return over the same period.
Add it all up and you can see that Facebook is not just a great way to play the growth in e-sports and the dawn of the VR era.
It's also a stock you can count on to grow your portfolio over the long run, as firms all over the world keep tapping the power of its massive user base.
Up Next: Michael Robinson's got his eye on a tiny, $6 million company with 40 registered patents centered on a molecular device with "miraculous" potential. So much potential, in fact, that Bill Gates and a crew of billionaires at Google have piled in. Michael thinks a major announcement is coming, too, one that could ignite a 28,700 sales surge over the next 18 months. Have a look...
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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.