It’s March, and the madness is at its most fevered ever with the loss of a No. 1 seed to a 16th-ranked team. Soon, the upset will be in the history books, and those big names of the collegiate basketball world will be looking towards the NBA. Investors will also be looking towards this year’s NBA lineup, but there may be something that they miss.
March and April will see the draft of the inaugural NBA 2K esports league, jointly owned by Take Two Interactive Software, Inc. (TTWO) and the National Basketball Association. This is only one of the signs that the stock may start to trend upwards as positive media and coverage of the first big-time merger of esports and the traditional sports world takes off.
TTWO Escapes Un-Trumped
Just like ID Software and “Doom” before it, today’s discussions on modern video game violence almost inevitably mention TTWO and its hallmark “Grand Theft Auto” series. The series that catapulted the software company into the spotlight is often considered an albatross around its neck due to this association between game violence and real-life criminal acts.
A March 8 meeting of game developers and congressional officials saw little effect on TTWO stock, however, as it trended slightly up that day with a 1.8 percent gain, even with some of the harshest critics of game violence and the president of the United States seated at the same table. This shows that the albatross continues to be more of a cash cow than a badge of dishonor, and video games continue to appeal to educators and counselors.
Moving to the S&P 500
March 19 saw the software company move from mid-cap to the S&P 500, where it gains a new level of exposure and can easily garner the interest of many investors and funds. The company is currently facing a downtrend “slump” due to perceived threats from more active competition in its market, but it estimates only a 5 percent risk to its EPS according to Morgan Stanley. It is likely to continue to hold strong even in the “bigger pond” of the S&P 500.
The Official NBA 2K Esports League
As March Madness winds up, the official launch of the NBA 2K esports league grows closer and closer. The original qualification period is completed, and the rules are set, meaning that the first season is now officially a go, and players are already in training for the esports and NBA merger. With the backing of official NBA team ownership, TTWO could see the boost it needs to get back into positive headlines and regain any community support it may have lost due to congressional hearings or speculation.
Juniper Research announced that the esports world is likely to nearly double in revenue, from $1.8 billion in 2017 to $3.5 billion by 2021. That’s good news for the Official NBA 2K esports league, which should take off in late spring and wrap up with an overall tournament winner by August, just in time for the big ramp up to TTWO’s next big game release.
Red Dead Redemption II
The delay of “Red Dead Redemption II,” a sequel to the earlier smash hit of the series, may be a boon to TTWO and its investors. The timing is perfect for the wind down of the inaugural esports event and a subsequent build for the release date in October. Pushing back the game is far preferable to delivering an unfulfilling title, as the open-world environment relies on many of the conventions of MMORPG developers that drove Andromeda development at Electronic Arts (EA).
That release didn’t go so well for the company, and it actually led many investors to divest themselves of EA due to the poor performance seen over the course of 2017. TTWO has taken great pains to avoid reenacting the apparent failure of EA’s and declared multiple times that it will release the game when it is completely ready. The game’s website mirrors many of the best designs out there. Any further pushback of the release date could be bad news for the company, but for now things look good for a strong year at TTWO.
