The Apple Arcade is Apple’s bet that subscriptions are the future of mobile gaming. What does that mean for the App Store?
Of all the jam-packed news stories emerging from GDC, perhaps the most significant was the Apple Arcade reveal. Between this new gaming service, the previously-announced Apple News, and Google’s competing Stadia platform, we’re seeing a potentially massive shift in how content is monetized. While it’s still too early to say if Apple will be successful, we can see many good reasons to closely watch the Arcade.
Apple Arcade is a subscription-based gaming service that will launch in the App Store in Fall 2019. It’s expected to include at least 100 games on release, each of which can be downloaded to home devices for offline use -- a notable distinction from Google Stadia’s streaming service. The full Arcade library will be compatible with Apple’s current device line-up, including the iPhone, iPad, Apple TV, and Mac computers.
We’ve already discussed the benefits and drawbacks of mobile subscriptions, but the Apple Arcade will operate on an entirely different scale. Instead of offering subscriptions for individual titles, the Arcade bundles multiple games into a single digital package. Apple even tapped major developers like Sega, Devolver Digital, and Sumo Digital to create Arcade exclusives, and we can expect new games to be added as time goes on. In short, Apple is making a big push to become the “Netflix for mobile games” using its already successful App Store.
The question is why?
Apple’s App Store already supports millions of games, with new titles arriving every day. It’s also a money-making juggernaut, collecting record-breaking profits for publishers. The latest projections suggest these gains will only increase as developers reach out to international markets.
Some evidence suggests that the problem may be that Apple has become a victim of its own success. Apple was a mobile pioneer, but Google has successfully replicated its formula at a lower cost.
Tenjin’s data suggests that iOS CPIs are on the rise in many of the most popular game and app genres, while Android rates remain steady. Meanwhile, users are downloading fewer apps compared to the iPhone’s heyday. The growth rate for new games is slowing. There are also concerns the App Store has become too uniform to sustain long-term interest -- almost every modern app is free-to-play, ad-driven, and has a time-sensitive launch window to attract customers. While these factors aren’t enough to slow down revenue, it seems to have been enough for Apple to start considering future trends.
Apple’s latest announcement suggests they are going all-in on subscription monetization models. Apple Arcade is just one part of a larger subscription initiative -- Apple News will offer access to paid news outlets and magazines, while Apple TV Plus will expand video streaming options. It’s safe to say Apple Arcade isn’t an experiment: it’s a bet that subscription models are the future of monetization. Whether it will actually succeed is anyone’s guess, but Apple’s opening gambit will give other companies the confidence to take this leap.
That’s not saying our current mobile game market will transform overnight. We still don’t know what Apple Arcade’s pricing model will look like, or how many subscribers it will have at launch. It’s also not clear what financial arrangements developers and publishers have made regarding subscription fee revenue compared to App Store revenue.
More importantly, the App Store will continue to attract users based on inertia alone. Apple Arcade’s 100 curated titles are a drop in the bucket compared to the millions of App Store titles that studios have cultivated for years. What’s more, the App Store’s ad-driven model and Apple Arcade’s subscription fees aren’t necessarily in direct competition with each other, letting each camp focus on specific audiences.
In the long-term, it’s even possible the Apple Arcade will prove a net benefit to the App Store. Since subscription revenue is relatively guaranteed, the Arcade doesn’t have to rely on ad-driven, free-to-play mechanics. That gives developers room to experiment with innovations that could eventually be deployed in the App Store ecosystem. Developers could use ad-driven monetization for reliable, low-cost projects, while subscription-based games act as a testbed for mobile gaming’s future.
Much like the App Store launch itself, we won’t understand the full impact of Apple’s actions for years. At a minimum, however, we should expect diversification of both game design and monetization methods. In the long run, that’s a good thing for game creators, marketers, and players alike.