Most of the talk about Activision Blizzard (NASDAQ:ATVI) in recent days has revolved around the controversy created by banning one of its esports tournament players for supporting Hong Kong’s anti-Beijing protesters, and Activision stock took the punishment.
Investors didn’t like the move, which forced the cancellation of an Overwatch event in New York City and had gamers calling for bans of ATVI products.
Who knew video gaming could be so controversial?
As I thought about a subject for my latest article about ATVI stock, I considered some sort of angle to do with the protest, but quickly concluded that I have little appetite for discussing the pros and cons of companies standing with or against Mainland China.
I’ll leave that to the politicians and protesters. However, a news piece that came across my computer on Oct. 16 gave me inspiration.
Brick and Mortar and Activision Stock
While Nintendo (OTCMKTS:NTDOY) has a flagship retail store in New York City, and recently opened a second in Tel Aviv, the majority of video game revenues today are generated online rather than in brick and mortar retail stores.
Hence, why GameStop (NYSE:GME) is continually “rightsizing” its business right out of business. Another company bound for the retail scrapheap; the “retail apocalypse” alive and well.
So, it would seem the last thing Activision Blizzard needs to do is open up its own retail stores, whether we’re talking one or two flagships in the same vein as Nintendo, or an entire network of them.
However, when I saw what Five Below (NASDAQ:FIVE) is planning for some of its stores, I couldn’t help but think Activision’s move into wouldn’t be nearly as wasteful as some might think. Here’s why…
The Five Below Model and Activision Stock
Nerd Street Gamers are all about esports events, whether hosting them at its own Localhost esports arenas in Denver, Philadelphia, and Huntington Beach, or helping others host them elsewhere.
If Nerd Street Gamers isn’t an indication esports are for real, I don’t know what is.
The really exciting part of the $12 million investment in the company, if you’re a Five Below shareholder, is the fact it will be opening 3,000 square-foot Localhost locations within some of the discount retailer’s stores.
The pilot will start in 2020, and if successful, should see as many as 70 stores hosting live, in-person events.
“The partnership with gaming expert Nerd Street Gamers is a unique opportunity to engage with an important and growing community of gamers in many of our locations across the country,” CEO Joel Anderson said announcing the partnership. “Gaming is a trend our younger customers are actively enjoying.”
In terms of generating traffic for its retail locations (Five Below has a large contingent of younger customers) the move is brilliant in my opinion.
How Does This Help Activision Blizzard Stock?
It doesn’t unless ATVI leverages the Five Below initiative to move further into esports events and content. One way to do this is to open retail locations that feature your esports content such as Overwatch and Call of Duty.
In Philadelphia, Comcast is spending $50 million in partnership with Cordish Companies, a Baltimore-based real estate developer, to build Fusion Arena, a 3,500 seat venue with 2,000 square feet of LED screens, training facilities, and private rooms. Located adjacent to where the Eagles, 76ers, and Phillies play, it will be the place to be for Philadelphia gaming enthusiasts.
Of course, Activision Blizzard doesn’t want to step on the toes of its Overwatch League franchise owners. Comcast owns the Philadelphia Fusion and its Xfinity brand is a big sponsor of the league itself, but I’m sure it can figure out the best way to balance the interests of all its stakeholders including the gaming equipment manufacturers, etc.
The reality, as Fusion Arena demonstrates, is that esports are here to stay.
With close to $2 billion in annual free cash flow generated each year, Activision’s got plenty of money to inject into the esports business including putting its name on a few flagship retail locations. Activision stock really could benefit from this kind of change.
At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.