Apple Inc.'s new game subscription service stands to benefit from the company's music and app sales expertise, but analysts said whether it can break out in an increasingly crowded mobile gaming market remains unclear.
Set to launch Sept. 19 on the App Store, Apple Arcade will allow subscribers to play more than 100 games across the company's devices for $4.99 a month. The service will initially be available on iPhones and will expand to other Apple devices over the next month. The games on Apple Arcade will be playable offline and will not include any ads or in-game purchases, a strategy that sets Apple Arcade apart but also deprives it of a revenue source that drives competing mobile services from Zynga Inc., Activision Blizzard Inc. and Tencent Holdings Ltd., among others.
Apple Arcade is set to launch Sept. 19. |
Joost van Dreunen, head of gaming at Nielsen Holdings PLC, compared the new Apple gaming service to the company's Apple Music, which launched in June 2015 and passed 10 million subscribers within six months. As of June 2019, Apple Music counted 60 million subscribers around the globe.
"We can safely expect around 50 million people to sign up [to Apple Arcade] within the first 24 months, provided Apple continues to add content," van Dreunen said.
According to data from Nielsen's SuperData Research unit, mobile gaming revenue grew 14% in July, offsetting declines in PC and console digital revenue, which led to a 5% year-over-year increase in worldwide spending on digital games to $9.02 billion.
While the rise of subscription gaming services could be compared to that of over-the-top streaming, some cautioned that Apple Arcade is not launching with a clear price advantage, unlike streaming video offerings.
"With OTT, there is the cost-saving aspect: subscribing to multiple services such as Netflix, Amazon's Prime Video and Hulu is still much cheaper than paying for something like Verizon's FIOS. However, free-to-play is still dominant on all platforms in gaming, so subscription services are essentially adding costs for gamers," said Lewis Ward, research director of gaming at IDC.
Ward thinks that growth for all gaming subscription services, including the mobile-centric Apple Arcade and the console and PC-based services by Microsoft Corp. and Electronic Arts Inc., will be slow and a battle of attrition in the long run.
"I don't think the 'Netflix for games' model will actually be viable for in the next five years, taking into the account the juggernaut that is the free-to-play model, especially in emerging markets," Ward said.
It also risks contributing to subscription fatigue for consumers, said Michael Goodman, director of digital media strategies at Strategy Analytics.
"People only have so much time and money to subscribe to all these services, be they video, gaming or music," Goodman said. "In the end, I do see more people subscribing to multiple video services while mostly sticking to just one gaming service."
Still, Goodman noted that Apple has access to internal data on games sold through its Apple Store, which it could leverage to better target marketing for Apple Arcade.
"Apple has in-depth knowledge of consumer behavior when it comes to mobile game purchases," Goodman said. "I doubt they are going to target gamers who only play free-to-play games, as convincing them to dig into their pockets would be very difficult."
He also said Apple Arcade's family-sharing feature, which allows up to six family members to access games on the service, could be an enticing proposition for parents with concerns about children potentially racking up credit card bills on in-game purchases in competitors' free-to-play games.
"Kids going on spending sprees is a major problem within the mobile gaming space," Goodman said. "What Apple Arcade essentially does is give access to a bunch of curated games that can be played by multiple people, on multiple devices, in the same household for one fixed price."

