It does not develop globally successful videogames such as Fortnite (9 billion dollars in takings until last May) or consoles like the PlayStation 5, which are sold out as soon as they are available. Yet it earns more than all gaming players combined. Who is it about? Apple, of course.
The key, as one tells long investigation by the Wall Street Journal, is in the App Store, the platform on which millions of applications are distributed (and rich dividends to developers), a trading center through which both the same Fortnite both titles like Honor of Kings, which are equally successful. From those money machines, Apple derives 30% of the app’s internal sales (15% in the cases of developers under a million dollars), thus managing to total 8.5 billion dollars in profits from video games on the App Store alone. , at least according to the calculations of the American newspaper based on the latest investigation by the US Antitrust, challenged by Apple itself, which considers them too high. They are more than they have put together from their own titles Microsoft, Nintendo, Sony and Activision Blizzard in fiscal 2019.
Apple also has its own parallel and internal gaming platform at the Store: it is called Arcade and in the face of a monthly subscription allows access to dozens of exclusive games whose development the company has somehow often contributed to. In the analysis, the WSJ limits itself to the role of Apple’s intermediary, wondering how this position of strength (which according to the judges would not be monopolistic) can be jeopardized.
The analysis
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The question of the metaverse
The first front is that of virtual reality, the famous metaverses mentioned by Mark Zuckerberg: the idea is that many digital businesses, as i concerts on Fortnite O Roblox or the new dynamics of shopping, can take place directly within continent-videogames, with transactions that could largely escape the hitherto profitable mechanism of the 30% slice of each in-app transaction. According to Activate’s estimates, the video game pie will be worth $ 198 billion in 2024 and the largest slice, despite console titles that often make the most noise, will come from mobile games (103 billion).
Even the same commissions at the center of the long and complex US process that contrasts Epic Games, which develops Fortnite, at Apple, may eventually have to be scaled down by some decision by regulatory agencies, in the US as in Europe, by law or by the courts.
The problem of China
Another threat comes from China, not about geopolitics, but a series of balances all internal to Chinese society. A new crusade for the mental health of young people has just begun there, with attempts to limit the number of hours they spend on the phone playing games of all kinds. Just remember, as the WSJ did, that 3 of the 5 most profitable titles in the mobile game category on the App Store are Chinese: above all, Honor of Kings of the giant Tencent, which generated about $ 2.5 billion in revenues last year alone. Overall, also in 2020, people spent $ 45 billion on games on the App Store: 31% of that slice was paid out by Chinese and 26% in the United States. The accounts are quickly made: Apple has earned 13.5 billion dollars or 5% of the group’s sales, which overall reached 275 billion. Even if it is difficult to understand exactly the revenues linked to the individual types of apps on the Cupertino Store, it is known that the overall sector of services (music, iCloud, Apple TV, advertising and more, which also includes the App Store) moved almost 54 billion dollars.
In conclusion, the App Store is “a gold mine” that from the 500 apps of 2008, the year of its launch, now has 1.8 million applications for all kinds of activities, from creativity to games, to finance, sport or information. According to the data of the lawsuit that opposes the giant led by Tim Cook to Epic, just 6% of game users on the App Store in 2017 would be responsible for 88% of total spending that year, with over $ 750 of individual spending. average. Of that small slice, 1% spend an average of $ 2694 in mobile game-related purchases. In short, there is the driving force behind the sector a rather small portion (but willing to spend a lot) of users that is added to a nebula of perhaps sporadic purchases, but on titles that collect hundreds of millions of players, from Candy Crush Saga a Pokémon Go, passing through Empires & Puzzles up to the aforementioned Honor of Kings.
The lawsuit with Epic Games
Judge Yvonne Gonzalez Rogers’ ruling in early September seemed to welcome many of Apple’s points of defense against Epic: he is in favor of Apple in 9 of the 10 aspects of the trial and, as we explained, it states that the company does not have a monopoly in the smartphone app distribution market. Yet there is one point, the only one on which Epic got the better of and also addressed by a Apple’s agreement with the Japanese authorities, which concerns the possibility for developers to inform customers of alternative, and perhaps cheaper, payment methods to the Apple platform.
If the developments remain to be clarified (it is true that much of the success of certain titles passes solely from the possibility of being downloaded, promoted and accessible from the App Store on a billion iPhones in the world), sure a flow of money could begin to flow out of Apple’s hitherto extremely effective system. That according to the numbers released during the trial (also in this case, several times publicly contested even by Tim Cook himself) would have given birth to in-app sales of games on the App Store a operating margin of 79.6% in 2018 and 2019. In short, the slice of mobile gaming may appear small compared to other items in the Apple balance sheet but it is made up of pure margin, of profits that remain with the company after subtracting the direct costs associated with the sale of goods and services.
Oberhasli
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According to Sensor Tower, the turnover of the App Store would have been 15.9 billion in 2019 dollars, with 69% of this pie connected to games. According to the calculations made on the basis of the documents discussed during the trial, as recalled by the WSJ, the App Store would weigh over 12 billion dollars on operating results. Almost one dollar out of 5 among those collected by Apple. Games alone, as mentioned above, would generate 8.5 billion, two more than those of the main players in the sector.
Apple has responded that all of these accounts, whether made by the court or other external companies or consultants appointed by the parties, they don’t take into account a lot of App Store costs (of which the group has never tried to determine the specific profitability as an autonomous business by virtue of indications dating back to the time of Jobs) and translate into margins that he describes too high, because they include all the revenues, but only a fraction of the costs. Even according to the Wall Street Journal, it is difficult to understand what will happen: Epic will appeal and perhaps Apple will try to prevent communications and alternative links in applications downloaded from the App Store.
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