Yahoo Finance Investing as a Game: Is it Big Business?
It's time to play "Strange Breadfellows," the game where we compare the financial performance of two polar opposite personalities.
First, let's look at Mary T. Barra. In fiscal year 2014, the CEO of General Motors Co. (GM) made $15.8 million, according an annual proxy statement filed with the SEC. Also in 2014, she was named one of Time's 100 Most Influential People in the World. By all accounts, she is an executive success story.
And then, there is Felix Arvid Ulf Kjellberg, a.k.a. PewDiePie. A self-styled obnoxious YouTuber, and proud of it, this 26-year-old Swede names hot dog vending as one of his favorite recent jobs. This may explain why he has dressed as a human slice of bacon -- though not why, in a recent video, he wedged a virtual reality controller between his buns (not the hot dog kind, mind you).
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A GM exec he's definitely not. But he's not far behind Barra in salary, either. He pulls down more than $12 million a year.
What's more, PewDiePie has a half a dozen or so kindred spirits in his mutant Millionaire's Club. And here's what they have in common: All have rabid followings in the gaming community. Now if these folks pull down seven or eight figures just talking about games, imagine how much money there is in the industry itself.
"At $100 billion last year, the video game industry is larger than ever," says Derrick Morton, CEO of FlowPlay, a developer of virtual worlds, social casinos and fantasy sports-based casual games. "With the rise of mobile, free-to-play, eSports, and virtual reality, there are also more avenues to capitalize on than ever."
Investors, take note. If the gaming realm is kid's stuff, then so is the exploitation of observable price inefficiencies within the hedge fund domain -- which may pale in confusing complexity to a hale and hearty round of Dungeons and Dragons.
Morton and other experts will also point out that video games pushed the computer industry make huge leaps in machine power and speed: arguably more so than any other marketplace sector.
In other words: Gaming tech isn't just for gamers anymore.
"This is an industry that is reaching more people in more places than ever," says Andrew Chanin, CEO of PureFunds, an exchange-traded funds developer with offices in New York. "As innovation advances, it will be exciting to see the various industries that benefit."
To be sure, PureFunds is in it to win it. Their Video Game Tech ETF (GAMR) is the world's first focused on the video game industry -- one that has evolved in four decades form Pong "to one providing innovative technological breakthroughs with applications spanning into education, health, fitness, training, simulation and more."
But that doesn't mean that everything in the gaming world, to borrow from basketball parlance, is a slam dunk.
"As quickly as new platforms and revenue models have taken hold, so has the massive shift in the investment landscape," Morton says. "The traditional publisher-and-developer model is now largely irrelevant and one major blockbuster or intellectual property is no longer enough to sustain an entire business in the long term."
Moreover, it's been an unremarkable year for two California-based companies -- Activision Blizzard (ATVI), the interactive gaming giant behind Call of Duty, and Zynga (ZNGA), a social video game service. Both are flat, trading at about $38 and $2.50 per share respectively.
One company on the upside is Electronic Arts (EA), owner of the popular Madden NFL franchise. It's higher by 13 percent and trading just shy of $74. Long-term, the stock has fared well: more than tripling over the last five years, as has ATVI.
Activision is betting heavily on its future as well. In February, it completed a $5.9 billion acquisition of King Digital, a London-based startup and makers of the Candy Crush series of social and mobile games. ATVI claims the move makes it the largest game network in the world, with more than half a billion users.
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But whether the wager turns into cash candy or a candy crash remains to be seen. And elsewhere, "There's still a lot of risk in the fantasy sports space," says Eden Chen, CEO and founder of Fishermen Labs, an app development company. "Yahoo (YHOO) is getting involved as a competitor and FanDuel and DraftKings have faced lawsuits."
There are also industry regulation issues to sort through, "but either way sports isn't going away and fantasy sports has seen tremendous growth over the last five years," Chen says.
DraftKings has raised an incredible amount -- more than $375 million -- and aside from Major League Baseball, lists Twenty-First Century Fox (FOXA), Kraft Heinz Co. (KHC) and the National Hockey League as investors. FanDuel isn't far behind at $360 million plus, and its roster includes Google Capital and Time Warner Investments.
Though on a much smaller scale, companies such as BlankMediaGames have exceeded the rosiest projections. With a week left to go in its Kickstarter campaign, the Austin, Texas, outfit raised more that $315,000 for its card game "Town of Salem."
The original goal? Just $10,000. The number of active game users? More than half a million. A fan? PewDiePie. (See how this works?)
While "Town of Salem" is a clever card reboot of the Salem witch trials, you could say the ultimate object of the game is to make mucho moolah. If all goes well, "We'll be seeking investment starting in June," says BlankMediaGames COO Blake Burns. "We have two years of solid growth and profitability, and believe it will catapult us into the spotlight."
They're also working on other games, too. "We have ideas for tons more games," Burns says, "but it's all very secretive right now."
A best-case scenario for any private endeavor like BlankMediaGames is to have a game go viral. It's what happened to the block-shuffling adventure game "Minecraft." Mention it to a 10-year-old and they'll know exactly what you're talking about. Mention it to a trader, and you might draw a blank stare.
That's nothing compared to a blank check with a whole bunch of zeroes behind the lead digit. Consider the game's creator, Markus Alexej Persson (also Swedish, by coincidence). At 36, he's worth an estimated $1.5 billion, just less than half the market cap of Square (SQ). Investors mired in Square's woes might well wish they had a piece of Persson's popular blocks, square or otherwise.
Now maybe it's been a while -- about five minutes -- since you barked at your teenage son to stop going on and on about his favorite games. Or perhaps you wag your finger at the way kids these days glue their noses to their laptops as they try to find the magic mine at the end of Level 10.
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But if you play the market, you might want to cheer them on instead. Virtual reality being what it is, that mother lode may just hold real gold after all.
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