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Apple Arcade Could Increase Gaming Industry – The Motley Fool



Apple (NASDAQ: AAPL) announced a number of new products on Tuesday's event, including one that could interfere with the gaming industry. Apple Arcade will bring a new subscription gaming model to Apple devices that could be a win-win for players and for some developers. It will smooth out the playing area for small developers who have trouble collecting games and gaining a steady stream of revenue.

For large gaming companies like Activision Blizzard (NASDAQ: ATVI) Electronic Arts (NASDAQ: EA) and Take-Two Interactive (NASDAQ: TTWO) but the news may not be as positive. They've never had trouble charging games and collectively dominating the gaming industry. This can be a disturbance they do not need.

  An Apple Arcade screen is viewed on multiple devices.

Image Source: Apple.

What is Apple Arcade?

Apple Arcade – Falling Autumn – will be a subscription service that delivers unlimited free playback time in a variety of games. Some of these games will be funded by Apple and some will be exclusive to the Apple Arcade platform. We do not know how much Apple Arcade will cost, what kinds of revenue-generating developers will get or much about titles.

What Apple seems to link to is the healing of games. "Apple Arcade games will redefine games and become curated based on originality, quality, creativity, fun and their appeal to players of all ages," the company said in a press release.

The selection will take place not only through funding, but also through the Method where games are promoted within Apple Arcade. If a game is heavily promoted on the Arcade platform, a game can be a hit, but as it can be done in the App Store, it can be buried without the right campaign. As this is a first of its kind subscription across multiple developers, the game's promotions will be the key to developers.

Apple Games to Stop Games

Apple Arcade has some parallels with the music industry, as Apple played a major role in disrupting two decades ago with the introduction of iTunes. Customers used to buy entire albums, which was how most players in the music industry made money. The one-off purchases gave little predictability to music companies, which led to the fine and the bust of small record companies. Then Apple came in and introduced individual song downloads – and gradually streaming.

Recording labels may have been drawn to streaming kicks and screams, but now customers of companies such as Spotify (NYSE: SPOT) ] and Apple Music's 56 million paying subscribers are bringing consistent revenue that has driven the music industry profits to new heights. Apple Arcade could do the same for game developers who could move from fighting tooth and nails to building a freemium model scale to be part of the Apple Arcade ecosystem. The popularity of the game, not to fool customers into buying gems or coins, could drive the developer's profits, which would be a welcome change.

On mobile devices, Apple Arcade can ultimately be a way to bring more consistent revenue to the gaming industry through things like monthly subscription services. That alone would be a big change in games.

Where music and video games diverge

Despite the similarities, there are some important differences between music and video games. Only three companies control approx. 60% of the music industry's sales today. They have the keys and negotiating power with distributors like Spotify and Apple who would see their subscriptions stunted if you left the service.

Video games are a little different. Activision Blizzard, Electronic Arts and Take-Two Interactive are the biggest players around and order tens of thousands of monthly active users at play like Call of Duty Madden Grand Theft Auto and World of Warcraft Builds large followings that buy games and upgrade regularly. But they only generated about 35% of the $ 43 million video game revenue in 2018, and there are countless other developers, especially on new platforms such as mobile, seeking a way to stand out. In this respect, Apple has a stronger position to build a platform and control customer relationships rather than developers who have the direct path. This can take some of the power away from big game makers.

If the incentive is to use the Apple Arcade platform and not a particular game, it can also reduce the clip of hit titles. Right now, the investment to build games is made forward by developers, and they make a return on this investment through the purchase of games on the hit titles so that people can come back to games. Their goal is to keep customers in their gaming system through engagement and customer investment in time and money in the game. If Apple Arcade becomes the platform and there is no financial investment in each game, this stickiness of each game will be reduced. And the cost of switching to a new game can only disappear.

The gaming industry is changing again

Video players have seen changes in distribution before and one of the reasons Activision Blizzard, Electronic Arts and Take-Two Interactive are as large as they are, because they have successfully navigated industry changes. This could be another big shift for game makers and could reduce the need for a gaming PC or console, especially if there is a cloud computing element like the one that Google recently launched to improve performance without increasing the operating requirements of smartphones. or tablets. [19659003] Until we know more about Apple Arcade as a service and how consumers use it, it's hard to predict the impact on gaming, but I think we're in another big round of disruption with Apple who charges the tax.


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