New Report Highlights Importance of Gaming for Apple

Posted on April 14, 2019 by Paul Thurrott in Games with 9 Comments

The Financial Times is reporting that Apple’s coming Arcade gaming service could generate more revenues than its TV or news subscriptions. So perhaps its not surprising that the consumer electronics firm is spending hundreds of millions of dollars secure new games for the service.

“Several people involved in the project’s development say Apple is spending several million dollars each on most of the more than 100 games that have been selected to launch on Arcade,” the publication reports. “Its total budget is likely to exceed $500 million.”

That gaming would be important to Apple isn’t surprising—the annual market for video games is bigger than that of any other content type, including Hollywood movies—but the firm’s preview of its Arcade service was, if anything, lackluster and lacking in details. And Apple is entering a crowded field: Established video game giants like Nintendo, Sony, and Microsoft are all working on their own services, and new competitors like Amazon and Google will complicate things further.

My guess for Apple is that it will see the most success with the casual gamers who choose the iPhone, and that its reach with the more serious gamers who prefer consoles or PCs will be modest at best. But that mainstream audience is inarguably the biggest part of the market. The only question is how you monetize people who aren’t attuned to paying a monthly fee to do something that is now free.

Getting some good games is one possibility. And while Apple provided little evidence of good games, important partnerships, or even a basic grasp of this market during its recent press event, it certainly has the money to spend its way into this world. And part of Apple’s strategy, the Financial Times says, is to give developers more money when they create games exclusively for Arcade and forego rival platforms like Google Play. Developers who go this route can choose to bring their games to other platforms after a months-long exclusivity period.

And on the topic of spending money, it’s unclear what Apple will charge subscribers for Arcade. But that hasn’t stopped the analysts at HSBC, quoted by the Financial Times, from predicting that “Arcade revenues will grow from $370 million in 2020 to $2.7 billion by 2022 and $4.5 billion by 2024, by which time HSBC predicts it will have 29 million users paying $12.99 each month.” At that rate—a bit of a stretch, in my opinion—Apple will be earning more from video gaming than it does from its TV and news subscriptions.

We’ll see. The video game market is certainly big enough to warrant this attention. But it’s unclear if Apple will emerge as one of the key players or just an also-ran.

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Comments (9)

9 responses to “New Report Highlights Importance of Gaming for Apple”

  1. jimchamplin

    This is Apple. The service will be a billion dollar a year also-ran.

  2. skane2600

    "The video game market is certainly big enough to warrant this attention."

    As a victim of the great video game crash of the 1980's I believe one should not assume that the video game market can continue to grow indefinitely.

    • Ugur

      In reply to skane2600: The crash of the video game industry back then is both a very good and also a very bad example. The reason is: yes, nowadays we are not just close to such a crash, it already happened multiple times over the past decade.
      Over the past decade more and bigger and more long term profitable game studios closed down than ever existed back in the 80ies crash days.
      The main difference is that nowadays there are so many more gaming companies and also so many more ways to make and sell games on so many more platforms and distribution ways, that even if one or several do quite badly, there are still other avenues to go on on which also at the same time are exceptionally profitable, at least to some.
      As example: The mobile gaming market has turned into something were free to play is basically de facto enforced by now as it is extremely rare that a game sold for an up front price can stay profitable for halfway long, and even among most free to play titles, the large majority makes close to nothing or nothing, but then at the same time there is like the top 50 in the store charts which make such a huge amount of money per day that it is a crazy huge business. Of course it is no healthy business and also extremely risky though, because it is based on constantly needing a huge amount of players because the in average 1-5% "whales" who regularly buy in app purchases has to be large enough to sustain all this, also the constant massive promition needed to keep and maybe even grow that audience.
      As soon as a game is out of the spotlight there, it is extremely difficult to bring it back in there for longer periods of time, since the daily flood of 1000s of new games makes that more and more difficult.

      Hence why Apple on the one side profits massively from their cut of the free to play market but also feels like they should push a subscription service next to it to a) profit on that end too and b) act like giving devs who don't want to do the free to play milking stuff an additional outlet, but we'll have to see how well that works in a model where it is just in another tab and the main tab still promotes millions of free up front stuff

      • skane2600

        In reply to Ugur:

        Game studios may have come and gone since then, but that's nothing compared to an industry revenue drop of more than 95%.

        But you're right about the impact of "free" both "as in beer" and "as in anthropomorphic" (i.e. the GPL) . Digital formats along with the Internet has made most content no-cost either legally or illegally and open source software has greatly diminished the economic value of software across the board.

        • nbplopes

          In reply to skane2600:

          What contributed to the reduction of the cost of software, is the move from software as a product to people as a product.

          I have seen VCs betting in companies with no revenue but say 30 thousand users in 6 months and dropping product driven companies of two or three people with a quarter of a million revenue in six months.. Closing a couple of year later with failing conversions.

          people products talk louder in the VC space. Until situation change the price of software will be low as most are partially subsidized if not entirely subsidized.

          • skane2600

            In reply to nbplopes:

            Some people just want to be in the software development business, not in the advertising business. With the increase in privacy regulations the people-driven tech bubble may finally burst exposing the billions of wasted money.

            Of course VCs are in the pie in the sky realm where they switch back and forth between being con men and being conned themselves.

  3. mattemt294

    Do you think you are underestimating the impact new, more traditional style titles in this device will have on the iPad? The iPads pretty powerful it could be formidable as a gaming device with some more conventional titles.

  4. dontbe evil

    apple fans will love to be milked even more from their beloved company