While subscription services for TV and music have been the norm for several years, in the games segment the business model is still very new, but it is rapidly gaining pace.
Several gaming companies already have their own spin on this kind of service, and the majority are console-oriented such as Xbox One Pass, PlayStation Plus and EA Access.
The most successful gaming subscription service in the market is Sony’s cloud-based Playstation Now which does not require users to own a console - only a strong internet connection and a supported gadget. Last year, Playstation Now brought in $143 million for Sony in the third quarter alone.
Amazon and Google are also looking to muscle in on cloud gaming, with the tech titans currently developing similar subscription services. It was recently announced that Google is launching a new gaming hardware at GDC next month, for its upcoming streaming game product which is being described as a 'Netflix for games' subscription.
Also eyeing a slice of the action in the games subscription market is Apple.
For Apple, a games subscription offering could bolster its services revenues significantly at a time when the company's bread and butter - its hardware sales, appear to have shrunk.
While Apple has not yet made an official announcement, the idea is that in exchange for a monthly fee, users would gain access to a library of games on iOS. Considering where Apple is today, we assume that the company is considering an app-based model rather than a cloud-gaming service.
For gamers, the value of Apple’s rumoured next step in the mobile gaming market lies in the convenience of accessing a bundle of games on a single platform at a flat monthly rate.
But how are developers positioned to benefit?
For developers of premium games such as Alto's Odyssey, Grand Theft Auto: San Andreas and Football Manager, it can be argued that a subscription model offers a better way to earn steady and recurring revenue rather than through outright purchases. However, such games only occupy a minority stake in the mobile gaming market.
The mobile gaming industry has moved almost exclusively to the freemium model, i.e games that are are free to download but make money from in-app purchases. Most of the games dominating the app charts embrace this business model, with the hit games making enormous profits. Our data shows that in 2018, free-to-play game Fortnite made over $390 million just on iOS devices solely from in-app purchases.
Much like Netflix, Apple will require anchor titles to seduce users to sign up. But with the top games making enormous profits selling in-app purchases, it is unclear how Apple will persuade the likes of Pokemon Go, Clash Royale and Guns of Glory to trade their lucrative profits for a percentage of Apple’s subscription takings. If top games aren’t part of the service, it is going to be tough for Apple to turn this venture into a success - even if it prices the service very low.
Regardless of business model, visibility remains a huge issue for any developer who uploads a game to an app store. Without a solid marketing campaign, it is easy for a product to drown in the tide. And even if a game is a success, there is every chance that guileful developers will try to copy its functionality. As a platform owner, Apple would have the ability to create real value for games within its service by promoting them in a way that would ensure their success. However, who is to say that Apple will remain content in merely providing consumers a buffet of games created by others. If somewhere down the line Apple decides to become a content creator, surely it would prioritise promoting its own titles over others (much like Netflix promoting Netflix Originals)?
There is some weight to the idea. All games for iOS are subject to a review process, meaning Apple has leverage in distinguishing which titles may catch on in a big way. Since it takes a cut of all revenues, not only does Apple know how much these games are earning but it also has tons of data on customers’ habits - all ready and waiting to be turned into content gold.
Allegedly, Apple has also discussed partnering with some developers as a publisher. If this were to be the case, it could entice developers to create exclusive games for the service by undercutting the fees they would normally pay to an outside firm for distribution, marketing and other related costs.
At the time of writing, details are still scant and it is unclear what the subscription fee would be. Unlimited access to games will be great for consumers, but ultimately it will be yet another subscription that they will need to find room in their budgets for, alongside the countless other subscriptions they’re already paying for each month. It is essential for Apple to identify a price-point where the subscription amount works out cheaper than going via in-app purchases.
A key strength for the company is that its hardware devices are highly powerful. The latest iPhones and iPad Pro boast some of the most powerful mobile processors ever made, making them ideal for gaming and strengthening the company’s competitive position to develop game subscriptions.
With the rise of the subscription economy transforming how we consume media, time and time again Apple has waited for others to go first and then gone on to dominate the market.
Let’s wait and see whether this time, it will be able to accomplish for gaming what Netflix and Spotify have done for TV and music.