Financial Times: Apple pouring a fortune into original games (video)

FT’s Tim Bradshaw estimates the initial investment is likely to exceed half a billion dollars.

From Apple spends hundreds of millions on Arcade video game service, posted Saturday:

Apple is spending hundreds of millions of dollars to secure new video games for its forthcoming Arcade subscription service, according to several people familiar with the deals.

The substantial outlay to developers shows how seriously Apple is taking games as a new source of subscription revenues, despite the public paying more attention to its star-studded push into television and news.

It also reflects the increasing competition in Silicon Valley for exclusive rights to the best content, as the iPhone maker bids against other new games platforms from Google and Tencent, as well as the console makers Nintendo, Sony and Microsoft.

Apple Arcade was unveiled last month at an event in Cupertino, California, where Hollywood celebrities including Oprah Winfrey and Steven Spielberg touted its TV+ platform. Apple is hoping to drive new and more predictable sources of revenue from online services as sales growth wanes for the iPhone.

Some analysts predict games subscriptions could become a multibillion-dollar business for Apple within a few years. But to establish itself in the market, Apple is having to make substantial upfront investments without knowing whether Arcade will be a success.

My take: Want to see who’s spending Apple’s money, and how? Que the video:

7 Comments

  1. Peter Kropf said:

    Right now, there isn’t a comment to the FT post that is close to recognizing this point:

    Apple is bringing to life games that could never be successful before. Apple is funding games with inherently high business risk given what the market is calling for now. (“These are not the games the market is looking for.)

    Apple is placing its Million $ bets on games with revolutionary new storylines. Games that are marked and protected for families as PG or not PG.

    Subscriptions will be free for a month or two. Gamers will be able to explore this world.

    And, if I were Apple, I’d intro price the subscription at $6 for a year or two and then increase subscription pricing ala Netflix.

    JMHO

    1
    April 14, 2019
  2. Robert Paul Leitao said:

    Apple is interested in increasing Average Revenue Per User (ARPU) and widening the company’s economic moat. Yet we have another story suggesting Apple is increasing its investment in its services portfolio because “sales growth wanes for the iPhone.”

    Last fiscal year iPhone revenue reached a record high for Apple. Although iPhone revenue is likely to decline this fiscal year due to the highly cyclical demand cycle, the services initiatives announced last month have been in development for years.

    Game distribution is not a new source of revenue for Apple. Quite the contrary. Game distribution is the largest revenue source for the App Store. What Apple is introducing is a new model for game distribution which will be a recurring revenue source for the company and the service will be a benefit for consumers. The reason why it will be a benefit for consumers is because it will provide access to fully featured games with no need for in-app purchases.

    Apple is willing to make a financial investment in the developers to reduce for the risks for the developers in adapting to a new revenue and distribution model. Similar to the way music distribution has migrated to streaming and away from the consumer purchases of singles or albums, game distribution is also being migrated away from individual game purchases or the download of games with in-app purchases.

    To push innovation Apple has increased the prices of its flagship iPhones. Innovation is expensive. The benefit to consumers of innovation is more advanced handsets with enhanced functionality. Many of the games that are being introduced with the new service will take advantage of Apple’s advanced handsets for absolutely stunning game play.

    Apple’s game service isn’t a response to slowing iPhone unit sales. It is in part a response to the innovation Apple packs into its handsets.

    5
    April 14, 2019
  3. David Emery said:

    I wish Apple would seed the Home Automation environment this thoroughly.

    1
    April 14, 2019
  4. Fred Stein said:

    It’s all about the game developers. Apple wins their hearts and minds and ROI.

    In the mobile platform arena, Apple already leads in Apps, and more so in Games. Apple easily expands this lead with a modest $500M investment.

    This $500M investment is a small part of the investments to support game developers which includes the image processor logic in their chips, plus their 5G modem investments (for future multiplayer games), gorgeous screens, and all the middleware and SDKs to support game developers.

    Tim Cook amazing vision, hiding in plain sight, goes further. – To make iOS (and siblings, WatchOS, etc) the best platform for a broad spectrum of digital transformations. He laid it all out last month: Finance, Video/Movies, Music, Games, and News. The biggest of all, Health, is coming. (The source for the last prediction is Tim Cook.)

    2
    April 14, 2019
  5. Aaron Belich said:

    Do you know what doesn’t burn / dry out your finger tips after a good gaming session? A good ol’ fashion controller. Do you know what can? A touch screen game pad.

    The best games have the best controller to match them.
    -Point and click (as long as the target point isn’t too small) – a finger / mouse pointer / trackball
    -2d platformer – buttons and direction pad
    -first person / third person shooter / adventure game – keyboard & mouse or twin analog sticks (much more sluggish)

    The bulk of the best games on iOS are in the first category. If Apple wants its customers to keep playing the others, they’ll need to invest in some additional hardware. And it’s one of the hardest thing to get right.

    0
    April 15, 2019

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