Apple wants users to get addicted to some Arcade games for one big reason
According to Bloomberg, Apple is making some changes to its Arcade app. People familiar with Apple's plans say that the tech giant is canceling some contracts it had with developers for new games while looking for other titles that are apt to retain subscribers. The report says that an Apple Arcade creative producer back in April made phone calls to some developers to tell them that their upcoming games didn't have the level of engagement that Apple wants to see.
Apple's Services business is on target to produce $50 billion in revenue this fiscal year
To put it another way, Apple wants titles that will get trial Arcade subscribers hooked on a game so that playing it becomes part of their daily routine. This way, when the trial expires, the user is more apt to sign up for a regular Arcade subscription. The app launched in September and is $4.99 a month after a one-month free trial. Since the trial is only for 30 days, Apple is looking for games that quickly get into the bloodstream of the player. Since Apple doesn't collect any revenue from ads or in-app purchases, the only money it takes in from the app is from subscriptions. To sign up from an iPhone, the user goes into the App Store and taps on the Arcade tab (with the icon of a joystick). Subscribers get unlimited gameplay.
The Apple Arcade is part of Apple's Services unit. Back in 2015, the year that iPhone sales peaked, Apple saw what was coming and decided to focus on making money from active iPhone units (which now totals close to 1 billion) by selling them Services with recurring subscription fees like Apple Music, Apple Arcade, and Apple News+. Other parts of the Services group include the App Store, Apple Pay, the Apple Card, iTunes, iCloud, AppleCare+, and more. Apple set a goal to double its Services revenue from the $25 billion it collected in fiscal 2016 to $50 billion by fiscal year 2020. And after the first half of fiscal 2020, Apple has brought in $26 billion putting it on track to meet its goal.
While Apple releases new games for Arcade every month, none of the 120 titles in the app have become a runaway hit. Developers say that Apple's strategy change is a sign that subscriber growth for the Arcade app is below expectations. And while the company has yet to reveal how Arcade is doing, Apple has recently added a second free trial month, another sign that business is not booming. Those familiar with the company say that Apple is believed to have spent $1 billion to $5 billion on some new games.
Apple did say that it was always its intent to change the lineup of games available on Arcade based on user feedback. Apple said in a statement, "Apple Arcade has redefined what a gaming service can be, putting unlimited play at the fingertips of subscribers and their families across all their Apple devices. We are proud to have launched the first-ever mobile game subscription service that now features more than 120 games, many of which are award-winning and widely celebrated for their artistry and gameplay. The vision has always been to grow and evolve the Apple Arcade catalog, and we can’t wait for our users to try the games developers are working on now." At WWDC last week, Apple announced some changes to Arcade including multi-user support for Apple TV and the ability to pick up a game where a user left off on another device.
While Apple's Services unit is, as we mentioned, running ahead of the $50 billion goal halfway through the fiscal year, there are some signs that the wheels are slowly falling off of the wheels. The Apple Card, a year old in August, is not available outside of the states, Apple News+ lost its top executive at the end of last year, and just this week the New York Times pulled out. Lastly, Apple TV+ is still looking for its first breakout hit.