Analysis: Apple's Arcade Seeks to Upend Another Business Model

Daily Herald (Arlington Heights, IL), September 15, 2019 | Go to article overview

Analysis: Apple's Arcade Seeks to Upend Another Business Model


Byline: Shira Ovide Bloomberg

Of the refreshed or new products that Apple talked about at its extravaganza this week, I'm most curious about Arcade, the $5 monthly subscription to video games for iPhones and iPads.

The success of Arcade hinges on Apple's ability to upend an established model for what are known as casual mobile games. These diversions -- think Pokemon Go or Clash of Clans rather than lavish Xbox or PlayStation video games -- tend to be free to download and play. The companies make money by showing advertisements in the games or persuading users to buy digital trinkets like an advanced virtual weapon.

In short, Apple wants people to pay $5 a month for the types of games they have been getting free, but without ads or in-app purchases. The proposition makes Arcade an intriguing test of Apple's capability to reshape an industry, consumer behavior and pricing models. (Other companies, including Microsoft's Xbox and Google, have or are trying to create subscription models, but for higher-end games.)

Apple being Apple, this just might work -- or not. Among the Apple watchers on Wall Street, no one seems confident the company can make a mobile-game subscription work, but few predict it will fail. That makes Arcade the get-out-the-popcorn tech product of the moment.

Apple has a generally deserved reputation for transforming consumer behavior or making niche behaviors mainstream. Apple made it commonplace to interact with computers with a mouse and a graphical representation of a desk. Apple wasn't the first company to chop records up into digital files like MP3s, but it got the music industry on board with the idea and made song downloads easy and appealing for everyone.

Today, I'm not sure Apple can shape people's habits at will.

Yes, tens of millions of people subscribe to Apple Music, but Spotify had already persuaded music executives and many millions of consumers to embrace streaming. It doesn't seem as if Apple has persuaded many people on the merits of a subscription to digital news publications. Apple executives scarcely mention the six-month-old Apple News+, other than to acknowledge that it exists. …

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