Private conglomerate Virgin Group — along with its iconic helmsman Sir Richard Charles Nicholas Branson — knows a thing or two about investing strategies. From airlines to media to mobile phones, the company has its fingers in a lot of pies. But according to a new website set to launch June 15, it appears that the next Virgin venture will be video games — and that has leading studios like Activision Blizzard (ATVI) and Electronic Arts (ERTS) taking notice.
Virgin’s new venture is online-only, built on the acquisition of videogame tournament company WorldGaming.com — a website that hosts gamers that use the Microsoft (MSFT) Xbox 360 and the Sony (SNE) PlayStation 3 for competitions and challenges. Some are just for fun, others offer prizes and even a cash purse. Apparently Virgin, Branson and Co. are banking on online video game tournaments becoming an even more popular (and profitable) form of recreation.
The revenue behind online video gaming is rock solid for those that figure out how to tap in. In April, Activision Blizzard sales and earnings got a big boost from online sales of an expansion pack to its Call of Duty: Modern Warfare 2 game — to the tune of $45 million in cash! Sony, which operates a video game studio in addition to selling its PlayStation 3 gaming console, recently announced a few weeks ago an effort to duplicate that success through online sales of Sony PlayStation 3 video games. Electronic Arts is a bit late to the train, but expect a big splash soon from this video game frontrunner when it comes to online sales.
Virgin may have a tough row to hoe if it looks to take on these video game heavyweights by offering its own titles instead of hosting existing game. There’s precedent for such partnerships already — for example, Virgin Gaming already has announced an upcoming ModNation Racers tournament based on the video game produced by Sony. There is even a promotion where video game retailer GameStop (GME) will provide you a code to enter the tournament with the chance to win a trip to Las Vegas.
Such partnerships will be crucial to Virgin for gaining recognition for its new venture and achieving profitability. If Richard Branson and Virgin can pull it off, however, they may be able to leverage such a relationship to benefit all parties – revenue and traffic for its VirginGames.com site and promotional marketing for new releases.
Full disclosure: As of this writing, Jeff Reeves owned a long position in GameStop in his personal portfolio.
