[ad_1]
Apple (NASDAQ: AAPL) recently launched Apple Arcade, a subscription gaming service that will arrive this fall. The platform will feature a library of over 100 games, including exclusive titles from SimCity creator Will Wright and Final Fantasy creator Hironobu Sakaguchi. It will be available in more than 150 countries and games will be playable without a constant Internet connection. None of the games will feature ads or microtransactions in which players pay for add-ons.
Apple is helping to fund the development of the platform's exclusive games, accessible from iOS devices, macOS and tvOS via an iCloud account. Players can record their progress on one device and continue playing on another if a file is saved on the cloud. Apple has not announced the price yet.
Apple's introduction of a subscription gaming service was not surprising since several reports earlier this year hinted at his arrival. But can the company turn Apple Arcade into a serious competitor in the increasingly crowded market of subscription gaming services?
A scene of Oceanhorn 2 for Apple Arcade. Source of the image: Apple.
What is Apple's strategy?
Apple unveiled Apple Arcade alongside its streaming video service, Apple TV +, a new version of Apple News and its Apple Card credit card (linked to Apple Pay) at a media event on March 25th. These services are all aimed at increasing Apple's service revenues, which grew by 19% per year to $ 10.9 billion last quarter, and accounted for 13% of its revenue. The main drivers of growth in the sector were the App Store (including ads from the App Store), Apple Pay, Cloud Services, Apple Care, iTunes and Apple Music, which serves more than 50 millions of subscribers.
Apple needs to increase its service revenues to reduce its reliance on the iPhone, which generated 62% of its sales last quarter. IPhone sales dropped by 15% a year during the quarter, partly due to strong competition in China and the cannibalization of high-end iPhones by low-end.
Morgan Stanley analyst Katy Huberty (via Apple Insider) estimates that revenues from his services will rise from $ 37.2 billion in 2018 to more than $ 100 billion in 2023. Huberty reportedly wrote that the introduction of new services in the ecosystem of Apple would make annual spending per user from 120 dollars. today at $ 220 by 2023.
A surprisingly conservative approach to games
Apple often adopts next-generation technologies with controversial design choices, such as a single USB-C port for the MacBook, removing the headphone jack from the iPhone and replacing Touch ID by Face ID on the new iPhones. That's why Apple Arcade seems technologically conservative. AlphabetGoogle, for example, recently Stages unveiled, a cloud gaming platform that promises to eliminate heavy downloads, installations and hardware requirements with on-demand gaming.
Apple Arcade is not a cloud gaming platform like Stadia. Instead, it's an unlimited download platform like MicrosoftXbox Game Pass and Electronic Arts& # 39; Origin Access (on PC) and EA Access (on Xbox Ones).
A scene of Hot Lava for Apple Arcade. Source of the image: Apple.
Apple may have an advantage over Microsoft and EA since Apple Arcade applies to more devices, but it's not a breakthrough like Stadia. The likely reason is that Apple's cloud infrastructure, which runs on third-party cloud platforms (including Google Cloud), can not support a complete online gaming platform.
Nevertheless, Apple Arcade seems to be an elegant solution to two problems. First, many mobile games are flooded with microtransactions and "pay to win" commercials. A closed garden on subscription can eliminate these problems and favor the development of games of better quality.
Second, it reduces Apple's dependence on its standard 30% reduction in revenue from the App Store. Several subscription-based applications, such as Netflix and Spotify, avoid paying these fees by asking users to subscribe to external sites instead of subscribing within their iOS apps. This rebellion could prompt iOS game designers to adopt similar strategies to avoid losing that money. Therefore, integrating game developers into Apple Arcade and assuming the role of publisher could help Apple strengthen its grip on its gaming sector.
But will the company be profitable?
Apple Arcade could help Apple expand its ecosystem and increase its service revenues, but its profitability could be difficult and its competitor services at a low price. The original access to EA costs $ 30 a year and the Xbox Game package costs $ 10 a month. Apple will probably finance the development of some games and share the revenue from its subscriptions with developers. It may therefore be difficult to generate profits.
However, the growth of high-margin services (such as the App Store) could offset these costs. After all, Apple's cost of sales for its service segment grew only 6% per year in the last quarter and accounted for 8% of its total cost of sales, indicating that the costs of its services are not out of control.
Apple Arcade might not become a successful product or a major profit engine, but it could also strengthen Apple's control over its customers and keep them locked in its walled garden.
[ad_2]
Source link