Apple Arcade at $4.99
Can services revenue offset a decline in handset sales?
Hey!
I’ll be back soon with more regular updates now that I’ve managed to survive the summer. There’s a couple of big deadlines headed my way (e.g. manuscript, teaching, conferences), so I appreciate your patience.
On to this week’s update.
Easy on the inter-dimensional goop, please.
NEWS
Apple Arcade will cost $4.99
This comparatively low price point suggests that Apple is keen on provoking a land grab in subscription-based game services. And it clearly builds on its experience with Apple Music: after initially offering a 3-month free trial period for its music service, it reduced this to one month in July this year. The Arcade comes with just one month from the start. If we extend that logic we can safely expect around 50MM people to sign up within the first 24 months, provided Apple continues to add content over time.
Subscription services have become increasingly popular among consumers and platform holders. An offering like Apple Arcade should appeal in particular to parents because minors tend to be equally excited and confused about the costs of free-to-play games. It is not, however, a play for the attention of the traditional hardcore gamer audience, at least not on the basis of the titles that will initially be available.
The introduction of the service carries benefits for especially the myriad of small fry developers on mobile. Having their titles acquired on a non-exclusive basis is an enormous win. It also protects them from traditional threats like cloning and copycats.
Scheduled to coincide with the release of iOS 13, the Apple Arcade is part of the company’s broader strategy to generate service revenue now that its device sales have started to slow: iPhone sales have declined -12% y/y in the three months ending in June. Link
GameStop lays off 120 Game Informer employees
Feeling the burn due to the shift in the way consumers play and spend money on games, GameStop is laying off 120 people as part of its broader GameStop Reboot initiative. The specialty retailer has been having a hard time. Having found no suitors willing to take over the retail chain, it is now overhauling its operations as consumers and content creators have moved onto other avenues to connect with each other.
Despite the heavy subsidy from GameStop, a shift in the broader economics of the games industry, particularly in the way consumers find new games to play, spelled doom for the magazine. By and large it is the live streaming platforms that have taken on the role of familiarizing audiences with novel content. Recently, EA’s Apex Legends managed to outperform another EA title, Anthem, by cleverly recruiting high profile live streamers on Twitch.
In July GameStop shares were down -27% due to investors worrying about the firm’s ability to benefit from digitization and the impact of a slowing current gen cycle for the PS4 and Xbox One. Nintendo’s continued momentum has kept GameStop upright, somewhat. But the empire is clearly crumbling. Link
Fortnite is slowing, yes, but so what?
After SuperData released some numbers that Fortnite was making *only* $204MM a month, a predictable interpretation among journalists was to call the game’s imminent demise. One explanation is that the current slowdown is seasonal. Digitization has transformed the economics of the games business, certainly, but it only stands to reason that people spend less time playing video games indoors in the summer. More specifically to the title itself, there is such a thing as saturation. After its spectacular rise to fame and the widely publicized results from its recent championship, a bit of Fortnite fatigue is only to be expected. Combine this with the generally slower news cycles in the summertime and we have an endless cadre of flabbergasted reporters befuddled over this new age video gaming parroting each other.
So far Epic has proven itself adept at anticipating soft spots in demand by rolling out new content at a regular clip. It has allowed it to maintain its #5 ranking among top grossing PC titles for the last few months without issue. And having keeping audiences playing this long is an accomplishment in itself. Link
Sony buys Insomniac
Across the industry we’ve been seeing major platform holders investing and acquiring content. In this context, it was only a matter for Sony to purchase the creator of its massively successful Spider-Man title for the PS4. The game sold 13.2MM copies.
What stood out to me here was Shawn Layden’s comment in a Bloomberg interview. Immediately after the purchase, with the intent of obviously bogarting premium content exclusively for its platform, Layden stated:
“We must support the PlayStation platform -- that is nonnegotiable, that said, you will see in the future some titles coming out of my collection of studios which may need to lean into a wider installed base.”
This implies Sony has not immediately shut the door on releasing some of its content on non-proprietary hardware. That realistic, of course, given the increasingly platform-agnostic success we’ve seen in the past two years, and echoes Microsoft’s apparent push to do the same. In an interview with Xbox’s first-party studio boss Matt Booty said they’d allow a recently acquired developer like Double Fine to remain multi-platform if they wanted. The traditional practice of exclusivity is dwindling fast and outright owning content creators is the new way to go. Link
What on earth is Netflix doing at Gamescom?
The images of Netflix’s presence at Europe’s biggest gaming convention, Gamescom, have been circulating all over. It is an odd presence, to be sure. Undoubtedly many of its attendees have already binged on season 3 for Stranger Things. The consumption profile makes sense, right? Tech savvy, early adopters like to play games and watch Netflix, especially when one of its series offers such a rich panorama of nostalgia. But what’s the business case here?
Netflix has been experimenting with interactive video for a while now. I’ve covered it before (Bandersnatch!) but much of it remains in an early development stage. They’ve also inserted video gaming as a recurrent theme in Black Mirror. And now the Cuphead characters are scheduled to get their own Netflix show. So the next natural step is to just make a game.
Content here, and everywhere else, is king. Where previously Netflix was able to differentiate because it was the only provider that offered a smooth working online video service, its competitors have caught up and have taken the sting out of its technological advantage. And with Disney about the open the gates to its Marvel / Star Wars universe for $7 a month with Disney+, Netflix needs to find an alternative content strategy to stay competitive. Much of its existing success comes from its long tail (more on this some other time) so investing in a category where Disney can’t easily or readily follow makes sense. Even so, Netflix entry into gaming may amount to nothing more than marketing but even then it’s money well spent.
PLAY/PASS
Play. Cyberpunk 2077 on Stadia. Consider it pre-ordered. Link
Pass. Amico Intellivision. I wholesale buy into making nostalgic purchases and recognize the success of the NES classic. But I feel they’re overshooting people’s appetite for another nice-to-have retro console. Link
Play. Apple’s hiring to fill some AR/VR positions. Link