A “Netflix for Games” type of service may be in Apple’s future. Apple has been developing a subscription service that will function for games much like Netflix does for movies and TV series, according to a Cheddarreport.
It’s still unclear what the subscription fee would be or what kinds of games would be offered on the service, noted Cheddar, which bills itself as a “post-cable news, media, and entertainment company.”
Whatever the fee for the offering, it could be tough for Apple to find an audience for a streaming service, maintained David Cole, an analyst at DFC Intelligence, a market research firm in San Diego.
“Streaming was a huge topic six or seven years ago, when there were a lot of startups looking to get into the space,” he told BlueHillco. “What they found out was that people weren’t willing to pay a whole lot of money for that kind of service.”
What’s more, big players like Amazon and Google have announced their intentions to join current kingpins Microsoft and Sony in the streaming market, Cole said. “It’s a very competitive landscape.”
Apple’s audience for the service — primarily users of its phones and tablets — may not go flocking to it, either, he continued.
“Xbox and PlayStation consumers are heavy-duty gamers. They’re willing to plunk down (US)$400 for a game system and $60 apiece for a game, and it’s still tough to get them to pay for a subscription service,” Cole observed.
“Apple faces the same challenge, but their consumer is not going to be into the games as much as a consumer who has bought an Xbox or PlayStation,” he pointed out. “Charging a Netflix-like monthly subscription fee is really tough. Anything over $5 a month is a lot.”
Focus on Casual Gamers
Apple will tailor its service to its user base, predicted Mark N. Vena, senior analyst at Moor Insights and Strategy, a technology analyst and advisory firm based in Austin, Texas.
“I suspect Apple will be going after more mainstream, family-oriented types of games. It’s hard for me to believe that they’ll go after hard-core games, where the gaming is first-person shooter and more violent,” he told BlueHillco. “They’ll probably target casual users — users who play sports-oriented games, trivia games, games that don’t require a lot of graphics power.”
The move could be a good one for Apple, Vena said. “If they stay in their lane and focus on phone and tablet mainstream games, and stay away from ultraviolent games, which would sully their brand, it will broaden their service appeal.”
Good Strategic Fit
A move into subscription gaming seems to fit in with Apple’s media strategy, noted Ross Rubin, principal analyst at Reticle Research, a consumer technology advisory firm in New York City.
“Apple is making lots of moves to offer subscription services in all major media,” he told BlueHillco.
“They have music. They acquired a company that offered all-you-can-eat magazine subscriptions. They’re working on a video service. So this would be consistent with that,” Rubin said.
“With 5G and faster 4G networks coming, that’s going to lend itself very well to launching streaming game services,” he noted. “Regardless of whether Apple does it or not, we’re going to see many more companies launch streaming game services because latency — which is key for this kind of service — will be lower than it has ever been on a cellular network.”
Latency can make a video streaming service frustrating, but it typically doesn’t outright ruin the experience, said Billy Nayden, research analyst at Dallas-based Parks Associates, a market research and consulting company specializing in consumer technology products.
That’s not the case with streaming games, however.
“Because of the responsiveness required to play video games, latency issues are far more crippling,” Nayden told BlueHillco. “Apple must ensure their streaming service does not have any latency issues for that reason.”
The 5G Difference
5G could be a game-changer for streaming gaming, said Michael Goodman, director for digital media at Newton, Massachusetts-based Strategy Analytics, a research, advisory and analytics firm.
“Over the past 15 to 20 years the landscape is littered with streaming game services that have tried and failed,” he told BlueHillco.
“The big difference this time is 5G, which — at least in theory — should minimize, if not get rid of, latency issues associated with streaming gaming all together,” he said. “This is why we are seeing all these companies, such as Microsoft, Google, Amazon, Verizon, and now Apple, get excited by streaming.”
Latency isn’t the only problem facing streaming gaming services, however.
“Streaming game services just have not been able to come up with a licensing model that compensates publishers with lost retail revenue if they offer new releases via streaming services,” Goodman observed,
Game Publishers Problem
A video game sells for around $60. A streaming service charges $10 to $15 a month per subscriber. That money needs to be split among multiple publishers, Goodman noted.
“As a result of that, publishers have been more than willing to make back catalogs that are no longer selling available to streaming game services, but not new releases, and it is the new releases that drive the market,” he explained.
The player best positioned to make streaming work is Microsoft, Goodman maintained. “Given all the internal game development studios they own, they can seed any streaming service with new releases from internal sources.”
However, “subscription gaming” need not mean streaming gaming.
“Considering where Apple is today, I would venture to assume it’s considering an app-based model rather than a new cloud gaming service,” said Michael Inouye, principal analyst at Scottsdale, Arizona-based ABI Research, a technology advisory company.
An app-based model typically allows a subscriber to download all the games they want and play them as long as their subscription remains active.
“Subscription services are gaining popularity across content markets from video to music and gaming, so it could offer value to the mobile gaming segment as well,” Inouye told BlueHillco.
“Even if Apple does not launch a subscription service,” he added, “it still behooves the company to explore this model because of the success other markets are experiencing, and to ensure they remain competitive.”
A pure game play by Apple would be “hugely complicated, expensive and dangerous for the company,” maintained Charles King, principal analyst at Pund-IT, a technology advisory firm in Hayward, California.
That risk is reduced if Apple acts as a broker in a Netflix-type model.
“That’s considerably less fraught,” King told BlueHillco. “The company could kick off the service after inking agreements with game developers, but like Netflix, over time it could also develop its own unique games and deliver them with the service platform.”
A subscription game offering could bolster services revenues significantly at a time when the company’s hardware sales appear to have plateaued, he added. “That should help calm investors and analysts who have helped drive the company’s stock price down.”
In 2018, consumer global spending on games was $129 billion, according to Piers Harding-Rolls, director at IHS Markit, a research, analysis and advisory firm headquartered in London.
“Games are very sticky, drive device usage, and are globally appreciated,” he told BlueHillco.
“For the leading tech companies, having a games service strategy is as important as having a video or music service strategy,” Harding-Rolls continued. “If Apple is confirmed to be working on a gaming service, it could help drive adoption of its devices, reduce churn, and also drive direct services revenue.”