Apple is the world’s biggest tech company and they compete with the likes of Sony and
Microsoft in a number of product categories including smartphones, tablets, smartwatches,
and wireless headphones.
But one market that Apple hasn’t formally entered is gaming.
Sony sells the Playstation, Microsoft sells the Xbox, but Apple has never created a modern
gaming console.
And this has left many people wondering why.
After all, gaming consoles are essentially just computers, and Apple is in the computer
business, so what’s stopping them from releasing their own game system?
Well, that’s exactly what we’re going to find out.
This is Greg with Apple Explained and if you want to help decide which topics I cover,
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So I want to start this video by making a clarification.
While Apple hasn’t made a modern gaming console, they did make one over twenty years
ago in 1996.
It was called the Apple Bandai Pippin, and it was designed to be a game system that could
also do some computational tasks.
It sold for $600 and was a huge flop, since only 42,000 were sold before the product was
discontinued a year later.
Now is this failure the reason why Apple hasn’t made another gaming console?
I don’t think so, but it does prove how difficult it is to succeed in the gaming market.
And if you do succeed, the reward isn’t nearly as lucrative compared to other product
categories.
Just consider the fact that the Nintendo Switch, which is the best selling console on the market
today, generated $1.2 billion in revenue in 2018.
And while the is a lot of money, it pales in comparison to Apple products like the iPhone,
which generated $218 billion in 2018.
Even Apple’s worst performing product, the HomePod, which sold about 1.5 million units
in 2018, is still making half of the revenue of the Nintendo Switch.
Which is one of Nintendo’s best selling consoles in history.
So right away you can see that there’s a problem with profitability, but that’s only
one part of the equation.
You also have to consider how often customers buy new game consoles, especially when there
are long periods of time between updates.
The Playstation 3 was released in 2006 and the Playstation 4 was released in 2013, that’s
a seven year gap between generations.
Imagine if the iPhone was updated once every seven years, it would undoubtedly have a detrimental
effect on Apple’s revenue stream.
And the theoretical situation I’ve been describing so far would be the best-case scenario
for Apple.
It’s assuming the company would release one of the best-selling gaming consoles in
history, which is unlikely considering the current climate of the gaming industry.
There are already three big players who dominate the space and have established loyal fanbases.
That’s why it has been nearly impossible for a new gaming system to achieve any level
of success.
And when it comes to Apple, they have very high unfavorability in the gaming community.
Mac computers aren’t designed for gaming, and iOS isn’t emulator-friendly.
Which means if you’re a serious gamer, you probably use android devices and PCs rather
than Apple products.
Resulting in many gamers not taking Apple seriously even if they did try their hand
at a full-fledged console.
But just because Apple doesn’t make a dedicated game system doesn’t mean they aren’t developing
a gaming platform.
Because back to 2008, Apple’s app store planted the seeds of what would help make
iOS the largest mobile gaming platform in the world.
And although more serious gamers scoffed at the idea that high quality games could run
on mobile devices, the effect of gaming on iOS would be felt by even the largest game
companies like Sony and Nintendo.
By 2013 games running on mobile devices like iOS and Android were generating four times
the revenue as games sold for Nintendo and Sony’s handheld devices combine.
And that not only attracted small, independent game developers, but also large publishers
like EA, who ended up making more money from iOS game sales than any other platform or
console.
Initial reactions to the success of mobile gaming from companies like Nintendo was to
act defensively.
They didn’t want their intellectual property to be available on any other platform, which
meant there wouldn’t be any Mario or Donkey Kong games for iOS.
Also, Nintendo felt like they needed to compete with Apple by offering games that felt similar
to what was offered on iOS.
This resulted in poorly received titles like “Animal Crossing: Amiibo Festival” and
“Paper Mario: Color Splash.”
But as you probably know, that isn’t where Nintendo stands today.
After all, we have games on iOS like Super Mario Run and Mario Kart Tour that feature
the company’s intellectual property.
So what changed?
Well, Nintendo experienced some serious operating losses from 2013 to 2016 that motivated them
to change their business strategy.
And I’ll get into that after I share some information about my business strategy.
If you guys haven’t noticed I do have a website that directs visitors to my channel
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So back to Nintendo’s new business strategy, instead of hoarding their IP, they decided
to create mobile games featuring their iconic characters.
And instead of creating games on their console that felt similar to mobile games on iOS,
Nintendo capitalized on the strengths of their hardware to build dynamic, fun experiences
that couldn’t be achieved on a smartphone.
They introduced the Nintendo Switch which featured removable controllers, 3D rumble,
and an IR sensor that allowed for unique gameplay.
But they also created groundbreaking titles like Zelda: Breath of the Wild and Super Mario
Odyssey which helped differentiate their platform from mobile, and convinced customers that
it was worth investing in the Switch.
And that new business approach is what helped Nintendo achieve the success they are enjoying
today.
They were able to recognize that mobile gaming and dedicated console gaming can coexist without
one cannibalizing the other.
So where does that leave Apple?
Well, just like Nintendo has experienced success in console gaming, Apple has had a lot of
success in mobile gaming.
The App Store’s gaming category alone generated $33.2 billion in revenue last year, and it’s
showing no signs of slowing down.
Apple’s gaming platform has become so popular, in fact, that for the first time the company
decided to have an awards show honoring some of the best apps and games of 2019.
And that might have something to do with the company’s new Apple Arcade service, which
prompted the addition of many new gaming apps onto iOS.
Some of which deliver a very similar gameplay experience as other dedicated consoles.
And that’s something I want to discuss in more detail.
It’s pretty amazing how much progress a device like the iPhone has made in the last
ten years.
Back then, mobile games could achieve the same quality of graphics as, say, the Nintendo
DS.
But in 2019, the game quality on iOS devices is pretty stunning.
And considering how quickly Apple has been improving the performance of its A-series
chipset, I think it’s possible that developers could make true console-quality games for
mobile devices.
And I think Apple is anticipating this with their decision to make the iPhone, iPad, Apple
TV, and Mac compatible with Xbox and PlayStation game controllers.
But console-quality graphics and controls are only one piece of the puzzle.
Because mobile gaming had another effect that’s proven to be a double-edged sword.
It helped devalue games in the mind of consumers.
Most games on iOS are free with ads or free with in-app purchases.
And if a game does cost money to download, it’s usually $5 or less.
So how successful would a full-fledged $60 console game be on the App Store?
No one really knows since it hasn’t been done yet, but I suspect it wouldn’t be as
lucrative as free games with in-app purchases.
In fact, we already have some relevant data on this subject.
Nintendo released Super Mario Run as a one-time $10 download with no in-app purchases and
it made significantly less revenue than their game Fire Emblem Heros which is free to download
but offers many in-app purchases.
Here’s what Nintendo themselves said about Super Mario Run’s profitability, “We also
ran campaigns to foster more interest [for Super Mario Run,] including a special price
offer for a limited period, to commemorate the release of the new version.
Although we have not yet reached an acceptable profit point, we have learned a lot in terms
of game development and deployment that we want to take advantage of moving forward.”
And here’s what they said about Fire Emblem Heros, “For this title, we listened to the
voices of our consumers and provided continual updates.
As the result, we are on track to meet our overall business objectives, including our
profit objectives.”
So it’s clear that, whether users like it or not, in-app purchases on mobile games is
extremely profitable.
It’s also the reason why they’ve been appearing on main console games like Star
Wars Battlefront II.
And if Apple is already in a profitable position in the gaming industry, then why would they
change that?
Why would they risk revenue loss on a dedicated console when they can simply continue to strengthen
their mobile gaming platform to be even more competitive and even more profitable.
Most people would agree that such a decision wouldn’t make sense, and I think that’s
exactly why Apple hasn’t done it.
Alright guys thanks for watching and I’ll see you next time.