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I invest using derivatives, and traded various markets for about 14 years. My company is designing a new kids android app, to be released in Q4 2013. N.N. Taleb and market experience taught me most of what I know about trading.
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  • The Spoiled Prince 0 comments
    May 4, 2012 3:02 PM | about stocks: ATVI

    In the world of casinos, slots are King, video games are Queen, and as long as there are players, the house is always the Spoiled Prince, personified in this tale by Activision Blizzard.

    Casinos, in effect, are gaming companies that let you gamble on their games. In the past decade they have replaced the old style arcades, as non gamblers play XBox or Playstation at home, while gamblers visit arcades (casinos) that spit quarters back at you. With Lord of the Rings slots, video poker with virtual dealers smiling and bouncing their virtual cleavage at the so called player, and graphics that mesmerize their viewers, it's all just a game in the end.

    Online poker has shown that gambling from home is worth billions. So who holds the key to this palace of home based, highly entertaining gambling? The Spoiled Prince of course.

    ATVI has programmed real money markets into a game for the first time, tapping Ebay to help with the legality of financially rewarding gamers for playing.

    To wit: Diablo 3 and its real money marketplace allows buying and selling of in-game swords and magic items for fun and profit (intellectual property never seemed so real). Once this has been perfected, applied, and expanded globally to their current and upcoming franchises, players around the world will finally feel justified in devoting hundreds of hours of their lives to their television and computer screens.

    ATVI has the strategic advantage of being top dog in the video game space, which means as money and eventually gambling is integrated, Vegas will have a most dangerous competitor in the "gamble from home" market. Imagine players in World of Warcraft playing no limit poker at their virtual local pub.

    In every case, Activision Blizzard acts as "the house", collecting fees from millions of games and transactions, all played on company servers.

    Fundamentally ATVI is in its golden era as a corporation, destroying estimates quarter after quarter, year after year. Even in a never ending recession, they print money, selling 25 million copies of COD Black ops worldwide (can you name the other players that print a billion dollars with a few keystrokes?), and printing another billion every time a Call of Duty game is released.

    ATVI has a digitally scalable, dependence creating, convex payout style business, able to provide unlimited upside, with laughably limited downside.

    So why aren't institutional investors placing their bets on this Spoiled Prince? As I will explain in my next article, investors and laypersons (non-gamblers) alike are almost unanimously infected with a biological condition that I call "Forced Deterministic Behavior", or "unenlightened minds only act once they are forced to act, and not a minute sooner".

     
    Themes: technology, video games, gambling Stocks: ATVI
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