Esports Will Be a Huge Stock Catalyst for Disney

Esports is going mainstream. And its path toward mainstream distribution goes through Disney (NYSE:DIS).

Disney and Activision Blizzard (NASDAQ:ATVI) signed an exclusive multi-year broadcasting deal that brings Activision’s ultra-popular Overwatch League to Disney’s suite of broadcasting networks, including ABC, ESPN, ESPN2 and Disney XD. Specifically, the deal gives Disney exclusive broadcasting rights for the Overwatch League playoffs, the Season 1 Grand Finals, which are set to take place in late July, and all of Season 2.

It is the biggest broadcasting deal ever for the rapidly growing esports community. ESPN has aired esports events before. But nothing of this caliber. The Grand Finals broadcast will include 10 total hours of esports streaming over four networks and three days. And the competitions will air live in prime-time, a first for both ABC and ESPN.

What does all this mean for DIS stock?

Great things. Esports is a rapidly growing market. But, interest is limited due to the niche internet distribution options such as Twitch and Facebook Gaming. ABC and ESPN aren’t niche distribution options. In the sports world, those are about as mainstream as mainstream gets. Thus, as esports goes mainstream, that path will ultimately turn Disney into a mainstream broadcaster of esports.

That has big implications for DIS stock.

Here’s a deeper look.

Esports Is the Next Big Thing

There really isn’t any hiding the truth here. Esports is the next big thing. Consumers love high-level competition, and esports is just that. Plus, it has all of the things that make other professional sports so popular, such as unique characters, good story-lines, intense moments and more.

Don’t believe me? Just look at the numbers.

The global esports audience grew by 37% in 2016 to 323 million. It grew by another 20% in 2017 to 385 million. And, that audience is expected to grow at a 20% annual rate to nearly 600 million by 2020.

At 600 million global fans, the esports community would be larger than the global football community (400 million fans), global basketball community (400 million fans), global golf community (450 million fans), and global baseball community (500 million).

Surprised? Don’t be. Although many traditional sports fans sneer at esports, professional video gaming is in many ways much more tangible, scalable, and modern than other professional sports.

On the tangibility side, these aren’t athletic gods like LeBron James. On the scalability side, competitions are primarily done over the internet, so no traveling is necessary (a player in Japan can compete with a player in England at essentially any time and without travel hassle). And on the modern side, esports is an internet sport and seeing as the internet is the future, it is also inherently a more future-oriented sport.

Altogether, esports presents a tremendous growth opportunity over the next several years. The question, then, is who will those big esports beneficiaries be?

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Disney Will Become a Major Player in Esports

Disney will be one of those big esports beneficiaries over the next several years.

At the present moment, esports is big and growing. But the audience is limited mostly due to the lack of mainstream distribution of esports content. Of course, there are Twitch, and Facebook Gaming, both of which stream esports. But, those platforms are inherently niche due to their being exclusively dedicated to esports (Twitch only has 15 million daily active users).

You know what isn’t niche? ESPN. ABC. Disney. That is why mainstream popular sports like NBA, NFL, MLB and NHL have huge broadcasting deals in place with Disney.

Thus, in order for esports to go mainstream, it needs to get on ESPN and ABC. That is happening. Now. And as a result, esports awareness will explode higher over the next several months. And, more importantly, ESPN and ABC will be viewed by the masses as mediums to watch top-notch esports content.

This is just the beginning.

As the esports community grows over the next several years, Disney will grow alongside it as a mainstream content distribution partner. This will boost Disney’s currently struggling Media Networks business. It will also add firepower to Disney’s streaming efforts, assuming Disney extends its esports partnerships to include streaming rights.

Altogether, the pathway for Disney to become a major player in the secular growth esports market just become crystal clear. Much like they are for the NBA, NFL, and MLB, Disney will become the mainstream distribution forum for esports content. That is huge for DIS stock.

Bottom Line on DIS Stock

DIS stock is one of my favorite stocks in the market. The stock has been beaten up on cord-cutting concerns. But, the company is making a huge pivot into streaming, and that should eventually propel DIS stock materially higher because the company owns the best content in the world.

That content library is only growing. If esports becomes a permanent member of Disney’s content war-chest, then this company’s streaming efforts could be more successful than even most bulls imagined.

As of this writing, Luke Lango was long DIS and ATVI.

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