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The Apple formula in video games: more benefits than Sony, Nintendo and Xbox, how do they do it?

The domain of Apple as one of the giants of the technology sector also extends to video games. They don’t make consoles, they don’t produce works, but the App Store has become the goose that laid the golden eggs of those of Cupertino. A report published by The Wall Street Journal This October 2 reveals, according to an analysis of the 2019 fiscal reports in many companies, that the profit obtained by Tim Cook’s company during that period exceeds Sony, Nintendo, Activision and Microsoft … together.

An unrivaled distribution showcase, the App Store phenomenon

But how do they do it? During the period studied – from April 2018 to March 31, 2019; before the dispute between Apple and Epic Games—, Apple took a 30% of all revenue billed for works such as Fortnite (Epic Games) or Honor of Kings (Tencent), a high commission percentage which is close to practically a third of the total just because it is hosted in its digital store, available on all the company’s devices; from iPhone to iPad, even Mac.

With that bit Guaranteed, the thousands of video games available on the App Store, regardless of whether they are free-to-play O premium, directly splash Apple with their multibillion-dollar revenues. The result is none other than operating profit of $ 8.5 billion for that year alone. To put it in context, Microsoft was covered in half the world for taking ZeniMax Media for 7.5 billion dollars. Apple could buy that Bethesda once a year with this performance.

That $ 8.5 billion in operating profit was more than the sum of giants like Nintendo, Microsoft, Activision Blizzard, and PlayStation in fiscal 2019 combined; according to the figures obtained from the analysis of WSJ.

China, regulations and legislation: the biggest danger for Apple

Apple may lose that position of dominance if it does not react to upcoming market stimuli or if there are changes in legislation, court orders or regulatory actions. Epic sued Apple in 2020 claiming it was abusing for the collection of their excessive commissions; a litigation that continues. From Washington to Brussels, the legislation seeks to regulate measures that prevent possible unfair policies that harm rivals, such as the unfair competition or monopolies. This September 10 we have known a new court order that forces Apple to enable external payment methods (links, redirects and purchase options) to pages outside the App Store, thus facilitating the payment of these commissions by not being made directly from your native store.

To that we have to add the market for China, another possible threat to Apple. The new regulations of the Asian giant aim to severely limit the number of hours per week that minors can dedicate to video games. Three of the five video games with the highest monthly turnover in the App Store come from China. Only Honor of Kings generated last year 2.500 million dollars through the integrated purchases of its users (Sensor Tower).

Also, of the 45,000 million spent by users through the App Store in mobile games in 2020, the 31% of that money came from China, while 26% came from the United States. If the firm of the bitten apple sees that market endangered, it would be in serious trouble, taking into account that they took 13,500 million dollars of that total; which corresponds to around 5% of the company’s total revenue in 2020 (50% of its revenue comes from the sale of iPhones, its flagship).

Kingdom in danger: a future marked by virtual reality

The implementation of the virtual reality it is the future for many market analysts in the entertainment world. Companies like Facebook (Oculus), Microsoft and Epic Games They are preparing for a new frontier that, according to studies, may be a source of billing in the future not so much for the sale of hardware, but for the software derived from it.

From Wall Street Journal They talk about interactive virtual worlds in which they take place social events, shopping, live events… Something similar to what Core already proposes, where massive concerts are held in a virtual metaverse. The video game industry will almost double its income in 2024 compared to 2016, according to the consulting firm Activate Inc., giving a total of 198,000 million dollars. Of that amount, 103,000 million will come only from mobile devices.

Apple faces a future marked by less decision-making power in a market segment where practically all the income it obtains is translated into profits, since a high percentage is based on commissions.

In the meantime, the App Store is still a great pandora’s box.

Sources | The Wall Street Journal; Sensor Tower

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