Its no secret that the new hotness in marketable growth over the last few years has been subscriptions services. We’ve seen the gaming industry jump in to grab their share of the consumer’s wallet through Game Pass and PS Plus, and to a lesser extent Nintendo Switch Online. We’ve also seen big tech jump in too. Google, Amazon, Nvidia and reportedly even Intel are now trying to capture a piece of the gaming pie using their own methods.
In the world of gaming, the big established players have acted predictably. Microsoft, Sony and Nintendo create benefits by giving away games from an already established library of games that have been out for some time. In essence, they’re giving you old games and sugar coating it as a benefit. There are plenty of other benefits like cloud saves, online play, and discounts, but the services are primarily advertised as methods of receiving “free games.” In practice, it means gamers are being given mediocre titles most months that they probably won’t play. Stil the service will get the occasional AAA experience a couple times a year to justify a continued subscription. Although the conversation month to month with this model can be interesting, seeing which platform is getting a desirable title that isn’t actually trash is most of the conversation. Most of my friends are Playstation Plus subscribers. Almost none of them care what the free games are month-to-month.
On the other side, we see market incumbents like Stadia and Luna establishing themselves through streaming. The biggest issues these digital platforms are having, at least in the short term, is establishing a solid library of titles and getting consumers to recognize that they exist. Streaming will be a viable option for most people in the future. For now, most consumers don’t see the value in it. There are issues with internet providers through data caps and download speeds all over the world and especially in the U.S. There is also a big problem with competitive advantage. If these streaming services don’t have exclusive games (most of them don’t) then there is nothing to distinguish them from the competition, and they risk being perceived as a pipeline through which they get their entertainment products rather than a provider (not unlike gas stations and phone companies).
One new company is doing things its own way. No, not Nintendo (although they are certainly approaching this new problem in their own antiquated way). Apple is actually the unique player in this space. It is the only new gaming platform provider that allows games to be played locally on the device. It is also the only new platform to provide new, exclusive games to its service. Apple’s model most closely resembles Microsoft, but Apple Arcade has its own advantages over the Xbox ecosystem.
Firstly, it's available locally on phones and tablets. I can play Grindstone offline anywhere, and since it's downloaded on my phone, it will always be with me. Everywhere. Xbox couldn’t match that availability unless they made their own portable gaming system (unlikely). While the Xbox platform is certainly doing well in its own right, it struggles to compete with the portability of Switch, phones and tablets. Cloud streaming is a great long term bet, but let's be honest about the reality of that option. An Xbox owner would likely only be streaming if he was away from home. So he would likely be streaming to a phone, where his console game isn’t optimized for a 6 inch screen. He’s going to have a poor experience, assuming the network isn’t clogged and he has unlimited data. To say nothing of the impractical controls of a console game on a touchscreen. He would need to be carrying an Xbox controller with him, which wouldn’t happen unless he was on a long distance trip. It’s a neat solution but ultimately an impractical one.
Secondly, the game library on Apple Arcade appeals to hyper-casual gaming, which makes up the bulk of market growth and current user base among “gamers.” No other modern gaming platform is taking casual games seriously. “Gaming” on traditional platforms is only becoming more hardcore, and Apple is presenting an ecosystem that will actually be accessible to new gamers, at the most attractive price point to boot. The industry’s revenue in mobile far surpasses traditional console gaming, indicating a far higher number of users and better long term opportunities. Gaming on the phone is something most people do, even if it's something as simple as solitaire. Those numbers are important and those casual users are important in a service focused ecosystem, where the size of the user base is the best indicator of health and sustainability.
Thirdly, Apple commits longer and harder to its services than any other company. Even if Arcade has poor subscription numbers and slow growth, Apple is bundling Arcade in with their other services as a “bonus” to tiers that many families subscribe to, including their music and TV services. That Apple intelligently bundles Arcade with its other services at the lowest paid tier is a fantastic strategy for getting normal non-gamers to try Arcade.
Arcade has a unique opportunity to create a walled-garden of high quality hyper-casual games. If they can successfully corner the market with smart gaming partnerships, they stand a great chance at building a lasting legacy here. Additionally, the reasons listed above make a strong case for why established gaming companies should be worried about Apple’s future strategic moves. Arcade has had a rough start, but it also has a long road ahead of it.
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