Apple Arcade: The 'Boutique' Of Mobile Games, But Ongoing Innovation Is An Issue

Apple unveiled Arcade, a $5/month subscription for mobile games, just over a month ago. We've now had some time to evaluate what it looks like, how it operates, and what impact it may have on mobile, mobile gaming, and innovation in the casual games space.

And we've seen how Google has jumped in with a similar model.

There's a lot to like about this kind of service, as anyone who has ever been nickeled and dimed to death playing a "free" mobile game knows. Or whoever's bought a game that eventually turned out to be awful.

With Arcade and Google's version, Play Pass, you pay one monthly fee to get 150 or so games, and never get prompted to upgrade, buy an advantage, pay more for a better weapon, or pay to access another level. That's great for parents, especially: you don't have your kids always asking for money for loot boxes or upgrades. And Arcade has privacy built-in.

On the other hand, it's yet one more Apple subscription that's reaching into your wallet every single month and extracting its pound of flesh. And, it does significantly change how games are currently marketed and monetized.

As such, the question is: how does this kind of subscription impact the future of mobile games ... and the monetization-innovation cycle that powers updates and refreshes to apps?

I had a chance to chat with Dan Greenberg, chief design officer at ironSource, a mobile monetization company, about the launch. You'd expect him to be concerned about the launch - after all, games in Arcade don't need to be monetized further - but he's actually pretty positive ... with a few caveats.

Here's our conversation:

Greenberg: Absolutely yes. This is the first time we've seen subscription in a mobile gaming hub, with unlimited games and at such a low price. And the subscription model of no IAP (in-app purchases) and ads gives it a new edge.

With regards to the business model, we can draw some parallels with other subscription services, though gaming will undoubtedly bring along its own unique set of opportunities and challenges. Take Netflix as an example, who has managed to sign up an impressive 149 million subscribers, but still spends massively on creating original content to attract new users. On the one hand, this makes for a strong user base but once the show in question is over, users tend to flee. In music the story is slightly different. The lack of original content brings the competition between platforms down to technology and practicality - users spend time carefully curating their playlists and switching between platforms is simply a pain.

Gaming has its own unique mix of challenges. Players will follow the content that they know and like, so the more traditional gamers, who are already loyal to brands and publishers and have bought into the entertainment value of an immersive gaming experience, will be more willing to pay for one or more subscriptions to access their must-play games. Yet similar to Netflix, will they flee once they get tired of the game, and can Apple generate a positive ROI for the games it has funded?

Meanwhile, when it comes to less complex genres, like casual and hyper-casual games, the difference in content may not be significant enough to move the needle and encourage a player to pay for a subscription. These are players who don't pay for access to games, or even engage in IAPs most of the time, so they are unlikely to pay for a gaming subscription. In that sense, the regular, IAP and ad-supported economy of mobile gaming mimics the ad-supported version of Spotify.

Greenberg: The comparison with Netflix isn't quite possible, as the counter-option of ad supported TV doesn't mimic the ad-supported games model. IAPs and ads function as part of the gameplay, fixing a hole in the funnel where a player may be stuck and potentially leave the game. IAP and rewarded ad units have become a core part of gameplay that players have come to know, love and expect. In ad-supported TV, ads don't bring value to the viewer in the same way.

Greenberg: From what we can currently see, the majority of publishers developing for Apple Arcade are providing more boutique, high quality games. This will create a very polished environment, with no distractions, and act more like a complementary service for traditional gamers who are keen to try out interesting, highly-curated, niche games without having to pay for each one separately. It will also be great for families who want to control the gaming usage of their children.

Outside of this audience, Apple Arcade is less likely to change the average consumer's gaming experience. 70% of smartphone owners in the U.S. play mobile games three to four times a week but don't identify as gamers - these are the new, average gamers. This self-identifying "non gamer" who plays in between activities or while bored is unlikely to buy a gaming subscription.

The bigger question is: will consumers be able to access games in Arcade from the big, successful publishers? It seems uneconomical for larger publishers to develop or for Apple to fund, games for Arcade that don't have the features, capabilities and tools to enable the scalable, profitable growth that we currently see in the most successful mobile games. Most likely, the successful gaming companies, many of which are multi-billion dollar businesses, won't derive sufficient revenue from Apple's model.

Greenberg: There are still numerous questions with regards to how Apple intends on working with its developers. On the compensation side, whether a developer only gets paid an initial lump sum or whether they will also get paid incrementally when/if a game succeeds, is still publicly unknown. However, the barriers to entry of a successful game are lower than they've ever been, due to the number of platforms supporting a game's growth. The upside of Apple Arcade is that it could be a good starting point for an indie developer who is focused on game development and wants to get funded. Once they decide to turn their game into a truly successful business, it would make sense for them to step out of the walled garden and generate maximum scale.

Developing for Apple versus going solo is similar to the difference between being a high-quality tailor to a select few VIP clients, and being a professional tailor at a large brand. The tailor is a craftsman and can create something beautiful, but the latter is both a craftsman and a professional, and through the support of platforms like ironSource, can grow his craft into a successful business.

This lack of business drive behind games in Apple Arcade will hold back innovation, which is the backbone of the mobile gaming industry. As opposed to Netflix where the shows have a beginning and an end, and where the viewer's journey is known from the start, games are potentially endless, with countless possible routes taken along the way, according to the various psychologies of the players. These multiple different possibilities and outcomes require constant input and innovation from the content creator.

Greenberg: Yes, developing for Apple Arcade is tying you to Apple which is not the ideal situation if your goal is to take your creation and reach its maximum possible audience.

Greenberg: As I mentioned above, I see the success of subscription in gaming sitting very well in certain genres. For gamers who actually consider themselves gamers, the more games in Arcade the merrier. Another area of opportunity is games for children, where parents want to control the games they have exposure to and avoid unexpected IAP charges. However for the mass market, where players play on-the-go, are happy to see an ad to help them progress in the game, and where they're not interested in continuously browsing for what's new on the market, I see there being a limited impact.

Greenberg: Not all music listeners use the paid version of Spotify and not all news consumers pay for the New York Times. As mentioned above, 70% of smartphone owners in the U.S. play mobile games three to four times a week but don't identify as gamers - these are the new, average gamers and are unlikely to sign up for a gaming subscription. Ads are an integral part in the entertainment ecosystem's make-up, offering consumers various ways to consume and discover content. Paid content works for some, ad-based content works for others. A blend can be seen in most industries and my prediction is that this will also be reflected in the mobile gaming space.

Greenberg: The mobile gaming ecosystem is a huge interconnected web, where players discover new games through ads in the current game they're playing. The industry relies heavily on advertising other games inside of their games, understanding that this is a huge driver for how the ecosystem continues to grow itself at such a rate. Without the inclusion of ads, the discoverability of games is heavily reduced, affecting the growth of games, particularly of those inside of Apple Arcade.

More control for Apple isn't the optimal situation for gamers or for developers. It stifles developers from reaching their potential and it takes the industry back to the curated model that we saw at the beginning of the stores, that didn't really work for the gamer in the discoverability of truly popular games.

For consumers in general, the introduction of yet another industry moving into the subscription model is another hole in their pockets. The subscription model in the entertainment ecosystem - think TV, podcasts, music and now gaming - is growing and will soon become prohibitively and collectively too expensive. Uptake may not be a question of desire but of finance.

Whether gamers will stick around with their game subscriptions for the long haul leaves another question mark. Research consultancy Magid discovered that TV streaming budgets are $38/month and that the intention is to try out the service for a few months to see if it's worth continuing or not. Will we see similar user behavior in gaming subscriptions? It's likely we will.