The private beta version of Activision Blizzard's (ATVI) Call of Duty: Black Ops 4 went live last week, and the early reviews were so encouraging that Activision stock jumped more than 7% that day on the strength of the players' reactions.

One of the key strengths noted in Black Ops 4 is its new battle royale mode, called Blackout. The battle royale genre, which pits dozens of players against each other in a winner-take-all battle, was popularized by games like Fortnite and PlayerUnknown's Battlegrounds (PUBG). Fans raved about Blackout, leading one analyst to suggest that it could be a "Fortnite-killer."

Another analyst has gazed further into the future, and thinks Blackout spells another big opportunity for Activision in the esports arena.

A screenshot from the Blackout mode of Activision's Call of Duty: Black Ops 4.

A still from the Blackout mode of Activision's Call of Duty: Black Ops 4. Image source: Activision Blizzard.

The excitement is palpable

In a note to clients, Jefferies analyst Timothy O'Shea writes: "While still early, there are signs Call of Duty: Black Ops 4 is shaping up to be a smash hit. ... We continue to believe Black Ops 4 looks like the most exciting version in years." The biggest driver of that excitement is the battle royale mode. 

O'Shea points to the popularity of the beta version on Amazon's Twitch streaming platform, saying it hit No. 1, "peaking at about 373,000 simultaneous viewers and surpassing Fortnite's 143,000 peak viewers on the same day." He also cited Jeffries' panel of 12-year-olds that said Black Ops 4 is the "No. 1 most requested title" for the coming holiday season. 

The next big esports title?

"Blackout mode looks like it could drive user engagement and Twitch viewership," penned O'Shea. "If so, this would be a key foundation upon which [Activision] could build a true esports business akin to what it has already done with Overwatch League [OWL]." He pointed out that Activision had "already sold 20 OWL teams for a collective $400 million to $500 million of revenue that will be recognized over the next six to seven years." In addition to the team sales, Activision stands to benefit from "streaming and broadcast rights, advertising, sponsorship, ticket sales, physical and digital merchandise, and food and beverage."

Toward the end of its inaugural season, Activision secured a deal with Disney to televise Overwatch League playoffs and Grand Finals on a variety of Disney networks, including ESPN, ABC, and Disney XD. This marked the first time a live esports tournament had been broadcast in prime time on ESPN. Previous deals included steaming on Twitch and sponsorships with HP and Intel, worth $17 million and $10 million, respectively. 

Already big business

When Activision announced in mid-2017 that it had sold the first teams for the Overwatch League, the world sat up and took notice. The first seven teams were sold to a "broad cross-section of big-league sports-team owners and veterans from the video game industry. The New England Patriots' Robert Kraft and Jeff Wilpon of New York Mets fame are among the headliners," as I wrote at the time. Other noteworthy additions for the traditional sports world include executives with the Los Angeles Rams, the Philadelphia Flyers, and the Sacramento Kings. This buy-in by traditional sports enthusiasts gave the league instant credibility.

The Overwatch League just completed its inaugural season, which consisted of 12 teams, and the finals played to sold-out crowds that numbered more than 20,000. The finale was also broadcast on both ESPN and video game streaming service Twitch, and Activision said "the estimated global average minute audience across both days of the Grand Finals was 861,205." 

Fellow Motley Fool contributor John Ballard has done the math and concludes that esports is already nearing $1 billion in revenue for Activision Blizzard.

Members of the Philadelphia Fusion and the London Spitfire in a photo shoot before the Overwatch League Grand Finals.

Members of the Philadelphia Fusion and the London Spitfire squared off in the Overwatch League Grand Finals. Image source: Overwatch League.

Not the only one

O'Shea isn't the only one excited by the prospects of Blackout. Benchmark analyst Mike Hickey said:

[The] upcoming Call of Duty: Black Ops 4: Blackout, Battle Royale (BR) mode, PS4 beta launched yesterday, greatly exceeding our expectations. Buzz from streamers was sensational, in our view. Popular Twitch streamers were gushing on the quality and fun of the play, while subscriber comments were calling Blackout a Fortnite and/or PUBG killer. 

The game also received rave reviews on gamer site Polygon: "After just a few rounds of play, it's clear that the team is on to something special. This new take on the battle royale genre, called Blackout, is exceptional." Another review, found on CNET, was equally flattering: "After playing a few matches of Call of Duty's Blackout private beta, I can say it's good. Really good."

There's no way to know for sure how the game will do until it's released, but O'Shea thinks it will top 10 million units in its opening weekend alone. If his thesis holds and Blackout becomes Activision's next entry into esports, the sky is the limit.