Apple spends hundreds of millions on Arcade video game service

Apple has spent hundreds of millions of dollars to secure new video games for its next Arcade subscription service, according to several people familiar with the offers.

The considerable expense incurred by developers shows how Apple is taking games seriously as a new source of subscription revenue, although the public is paying more attention to its efforts as stars for the television and information.

It also reflects the growing competition in Silicon Valley for the exclusive rights to the best content, the maker of iPhone making deals on other new Google and Tencent gaming platforms, as well as on the Nintendo, Sony and Microsoft console manufacturers.

Apple Arcade was unveiled last month at an event in Cupertino, California, where Hollywood celebrities, including Oprah Winfrey and Steven Spielberg, have touted its TV + platform. Apple hopes to generate new, more predictable revenue streams with online services, as iPhone sales growth declines.

Some analysts predict that game subscriptions could become a multi-billion dollar business for Apple in a few years. But to enter the market, Apple must make significant initial investments without knowing if Arcade will be a success.

Several people involved in the development of the project said that Apple was spending several million dollars each for most of the more than 100 games selected for launch on Arcade, whose total budget is expected to exceed $ 500 million. The game service should be launched later this year.

This compares to the $ 1 billion announced in 2017 by Apple for budgeting TV + original content, although analysts believe its spending on video has already exceeded that level.

Apple offers developers an additional incentive if they agree to have their game available only on Arcade, by postponing their release on the Google Play online store for Android smartphones or other subscription game sets such as Microsoft Xbox game. But after a few months of exclusivity, developers will be free to publish their games on PCs or other gaming consoles, such as Nintendo's Switch or Sony PlayStation.

Apple declined to comment.

Previously announced titles for Apple Arcade include well-established brands such as Sega's Sonic the hedgehogCartoon Network and Lego, as well as new games from independent developers such as ustwo games, Annapurna Interactive and Bossa Studios. Most of the selected people have already proven themselves on the iPhone's App Store. Apple's progress covers more than the cost of developing a typical independent game, according to people familiar with the terms.

Apple Arcade's interest in independent games is different from that of the big Hollywood names attached to TV + and has let some developers be wary of the number of people subscribing to the service.

"His Next to, not Marvel, "said a video game industry executive, referring to the award-winning independent film in the California wine region.

Nevertheless, with games now the most lucrative part of the entertainment industry, Arcade could become bigger than TV + in the coming years.

Apple has not announced how much it will cost subscribers for Arcade or TV +, but HSBC analysts have estimated that Apple Arcade's revenue will rise from $ 370 million in 2020 to $ 2.7 billion in 2022 and $ 4.5 billion in 2024, when HSBC predicts 29 million users are paying $ 12.99 a month. These figures are higher than its revenue estimates for Apple TV +, at $ 2.6 billion by 2022 and $ 4.1 billion by 2024, and at Apple News +, which is expected to generate $ 1.7 billion and $ 2.7 billion respectively.

In addition to giving a boost to its service business, Apple's main ambition with Arcade is to regain the advantage in games it previously had on Google Play.

For many years after the initial launch of the App Store, mobile phone games would first be introduced on the iPhone in order to reach Apple's more consumer customers. The developers also hoped to be rewarded by Apple for giving priority to its devices with a leading positioning in the marketing of the App Store.

Today, the much larger share of Android in the global smartphone market means that big developers are launching their titles simultaneously on both stores. This is especially true for free games like Candy Crush Saga, Clash of Clans or Fortnite, which derive most of their revenue from advertising or in-app purchases of bonuses, extra lives and character personalization.

"Paid games are often critically acclaimed and loved by those who play them, but competing with free is hard, so even the best of these games have only reached a smaller audience," he said. Apple said at the announcement of Arcade.

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