Epic Games' Fortnite has made a rapid run in its first two years of existence and threatens to mark a victory royale over Activision Blizzard (ATVI) if the Santa Monica-based game giant can't create a competitor.
Shares of Activision Blizzard are booming in morning trading as optimism abounds after a long winter for the stock.
Action Alerts PLUS portfolio co-manager Jim Cramer noted that a Fortnite-like game could help serve as a major catalyst to stoke a warmer spring.
"What happens if [ATVI CEO] Bobby Kotick says he has Battle Royale?" he asked. "If he does, then the stock is going to be a buy."
The take is a salient one, as analysts have been noting the necessity of this type of release in 2019.
Keybanc Capital Markets analyst Evan Wingren warned that Fortnite's ability to overtake the Activision-owned Call of Duty and Overwatch franchises could pose a long-term engagement risk and damage the secular eSports story for the stock.
"Overwatch League slowing would negatively impact [Activision]," he warned in a potential bear case. "Fortnite could take more share from Overwatch."
The uncertainty is added to as the World of Warcraft-maker is usurped as the headliner at eSports' biggest events.
For one, Fortnite headlined the World Series of eSports that touted a $115,000 grand prize, the richest prize in 2018 according to eSports Earnings.
Overall, it now sits as the number five game in terms of earnings, hot on the heels of Starcraft II, the only ATVI property in the top five. The popularity of Fortnite is further intensified as eSports earnings notes that Fornite hosted less than 200 tournaments in 2018 compared to Starcraft's 5300.Streaming to Success
Video games, perhaps more so than other industries, is driven by popularity among consumers. More granularly, it is driven by popularity among relevant players that set the standard on Twitch.
Twitch, the Amazon (AMZN) -owned video game streaming platform, has been a solid driver of gaming popularity and made millionaires out of popular streamers like Ninja and Myth.
One of the key trends in Twitch stardom for these individuals, who become tastemakers for video games, is the massive viewership they garner playing Fortnite.
The importance of Twitch could only increase as Amazon enters the video game streaming space more forcefully and looks to become the key platform for gaming.
The Seattle-based behemoth is preparing to join the game with its own streaming video game service that would add to the company's Twitch holding and its suite that already offers Prime Video and Prime Music.
EA, for example, had a relatively disappointing earnings, but its besting of Fortnite in recent Twitch viewership trends with its new Apex Legends game clearly clouded that impact judging by the stock implication.
"The immediate success of the surprise launch of Apex Legends from EA's Respawn might end up being more important to the stock over the long term than guidance for a lackluster 4Q," said BMO Capital Markets Gerrick Johnson in a recent client note. "EA now has a solid entry into the battle royale genre that is generating a lot of buzz and dominating Twitch viewership since release."
Driving the idea of "tastemakers" on Twitch, Shroud, a Twitch streamer with 5.2 million followers and the aforementioned Ninja, who courts 13.3 million followers, have been streaming the game and encouraging their millions of viewers to pick up a controller and check it out.
That market moving force in video games is clearly translating to a stock market move.
The important takeaways from EA's success are twofold.
One is that Fortnite is not unassailable.
The second, and arguably the more important takeaway, is that the key to controlling this market is creating games that are fresh and gain attention from the aforementioned streamers that bring in millions of views.
"Bottom line, Activision isn't going to be able to rely on old franchises like Call of Duty they could in the past," Action Alerts PLUS research analyst Zev Fima told Real Money. "Making a play to be the eSports industry leader was a good move but more than anything, Activision needs new innovation."