WSJ: Wow! Apple makes billions selling games

From Tim Higgins’ “Apple Doesn’t Make Videogames. But It’s the Hottest Player in Gaming.” in Saturday’s Wall Street Journal:

apple games billionsApple doesn’t make hot videogames such as “Fortnite,” or consoles such as the Xbox. But with little fanfare, Chief Executive Tim Cook has turned the maker of the iPhone into one of the world’s largest videogame companies.

The key is the App Store, its digital marketplace, where the company sells and distributes thousands of games by other companies and developers, from Epic Games Inc.’s “Fortnite” to Tencent’s “Honor of Kings” — and takes a 30% cut of sales. That explains a lot about the tech giant’s current battles with rivals.

Apple raked in more profits from games than Xbox maker Microsoft, gaming giants Nintendo Co. and Activision and PlayStation maker Sony Corp. — combined— in its fiscal year 2019, according to a Wall Street Journal analysis of figures released as part of the company’s recent antitrust trial.

Apple’s operating profits from games that year totaled $8.5 billion, according to the Journal analysis, exceeding the other four companies’ combined gaming operating incomes in the same period. The tech giant said operating margins discussed during the trial were flawed and as a result are too high.

My take: Note that the hook for the “hottest player” headline is a 2019 estimate that Apple disputes. Overall, though, a well-researched article.

9 Comments

  1. Dave Ryder said:
    I just think that much of Apple’s investment in iOS hardware has been to make it possible for these games to run on them. (Like console devices in that regard.) So it seems reasonable that Apple gets corresponding fees from game developers that rely on those advanced capabilities.

    5
    October 2, 2021
  2. David Emery said:
    Calculating ‘profit’ is an exercise in accounting. “What answer do you want? I’ll allocate costs to meet that target.”

    6
    October 2, 2021
  3. Fred Stein said:
    Upvoted Horace, Dave, David.

    Apple’s success is the result of $B’s invested in chips, software tools, and ecosystem over many years. iOS remains the best platform for App developers precisely because Apple’s dedication to protect consumers and developers, which is a recurring expense. Specifically to gaming revenue, parents give iPhones to their kids because they trust Apple for all the above reasons. These kids, even as the grow up, drive the gaming revenue.

    One cannot remove the investments and recurring expenses from a calculation.

    6
    October 2, 2021
  4. Fred Stein said:
    Nit picking with Higgins. He calls out Apple’s “dominance”, which not true. Apple has less than 1/2 the gaming revenue. So what is the gripe? Apple is more profitable.

    5
    October 2, 2021
  5. Robert Paul Leitao said:
    Let’s not overlook Apple Arcade. It’s available for $4.99 per month as a standalone subscription and is a component of every Apple One services collection. There are hundreds of games available and there are no in-app purchases – all games are fully featured. New games are constantly being added. Apple Arcade has games that will appeal to all members of the family. Games work across all Apple-branded devices.

    3
    October 2, 2021
  6. Robert Paul Leitao said:
    I’d like to see how Microsoft, Nintendo and Sony present their accounting for game-related revenue and profits. Because all three are gaming console/device makers, if revenue and reported margin on gaming-specific devices are included in the numbers, it would definitely reduce reported margin, margin ratios and profits on a per revenue dollar basis.

    0
    October 2, 2021

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