Apple Arcade: The Netflix of Mobile Games Is Just Another Piece of the Puzzle

Daniel Martins

Some of us, Apple shareholders and analysts, have barely paid attention to it. But Apple Arcade has been around for over eight months. During this time, the “Netflix of mobile games” has earned mixed reviews from users, and a cold shoulder from investors.

Allow me to introduce this little-known offering in Apple’s service arsenal.

What is Apple Arcade?

It is a gaming subscription service launched by Apple on September 19 of last year. For $4.99 per month in the US, users can download from a library of titles and play them on the iPhone, iPad, Mac and Apple TV. Apple Arcade can also be paired with a gaming controller and television for a PlayStation-like experience of sorts.

What Are the Games Like?

Apple started off with about 70 games in the portfolio and a promise to release 100, a target that it has recently reached. A few well-known publishers have been involved in the development of the games – Konami, Sega and Capcom among them.

Gaming styles vary from sports to arcade to meaningless time wasters. Popular titles include What The Golf, Pilgrims and Card of Darkness. Unfortunately, household games that can be downloaded from the App Store, such as Fortnite and FIFA, are not available on the platform.

Screenshot of Apple Arcade
Apple Arcade imageThe Gamer

Is Apple Arcade Any Good?

This is where the problems begin. A look around the internet reveals that users have been less than thrilled about the service so far. David Price, editor at Macworld, does a good job at summarizing the main issues:

Most of the really excellent games arrived at the start. People signed up on the understanding that Arcade was an ongoing concern – that whatever was available now, there would be far more of it to come. And they are now, understandably, disappointed, and many are ending their subscriptions. A narrative is forming: that Arcade has somehow failed; that it hasn't delivered on its promises; that Apple must be struggling to get developers to release on this platform. That something is wrong.

Ouch!

Where is the opportunity?

One of the estimates that I have found suggests that Apple Arcade is expected to have 12 million subscribers by the end of 2020. To calculate revenues at the run rate, the math is simple: 12 million users times 12 months times $5 adds up to $720 million in arcade subs sales.

For a bit of context, the last of the Fortune 1,000 companies generated revenues of nearly $2 billion in 2019, nearly three times as much as Apple Arcade may produce this year. Within Apple’s own service portfolio, Arcade would probably amount to a mere 1% of 2020 revenues. Let’s not even think about margins and earnings, since the cost to develop these games is probably substantial and the scale is just not there yet.

Apple's estimated 2020 service revenue breakdown
Apple's estimated 2020 service revenue breakdownDM Martins Research

The key takeaway is that Apple Arcade is unlikely to be a meaningful generator of service revenues any time soon – or maybe ever. However, it serves as yet another piece of the ecosystem puzzle.

Perhaps a full package of streaming music and video, premium access to news, plus a mobile gaming platform may help to keep users hooked on their iPhones and iPads. And herein lies the real opportunity.

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