While Apple reaps a vast fortune from selling tens of millions of iPhones every quarter, not all of its successes are about moving physical units. After all, physical sales fluctuate, so it's important to diversify your offering to weather bumps in the road. But amidst news and rumor of plateauing unit sales, the company also reported in November that it had collected $10 billion in revenue from "services."
For Apple, the cash flow doesn't stop when you buy your phone or tablet at the store; the company also takes a 30 percent cut of revenue collected from iOS App Store apps, and a 15 percent cut of all subscription fees after the first year. (The iCloud online storage service is also a money maker, but it's historically been a relatively small part of the pie.)
In this context, rumors have long swirled that Apple is crafting a competitor to Netflix, where it would produce its own original content and charge a monthly fee. But a new report from financial news network Cheddar indicates that Apple is planning a subscription-based game service as well, though the target platform was not mentioned.
With Epic Games skipping the Google Play Store for its release of the Android version of Fortnite, due to the store's own 30 percent revenue cut, Apple may be positioning itself in anticipation of other market disruptions. According to Nielsen's SuperData Research, the colossally popular game made $2.4 billion just in 2018, though this number is for all platforms where the game is available.
Due to practical and technical limitations, Epic can't skip the official app store on iOS like it did with Android, so a substantial amount of Apple's $10 billion dollar take reported in November presumably came just from Fortnite -- and literally millions more keep flooding in every day.
With an increasing number of mobile developers starting to voice their unhappiness with the 30 percent cuts customarily taken by Apple, Google and Steam, a subscription game service may be one way to keep them in the fold, since Apple reduces its take to 15 percent for users who are still subscribed after 12 months.
Meanwhile, Epic Games itself has launched a storefront that takes only a 12 percent cut of revenue, subscriptions or otherwise, and it has plans to add mobile games alongside the current selection of Windows titles.
As a result, there's increasing pressure on Apple to reach out to game makers, instead of being able to dictate the terms like usual -- even though Epic will presumably be focusing on the Android side of mobile gaming, where apps can more easily skip the Google Play Store and its 30 percent cut.
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Could Apple transition gamers from a free-to-play economy based on in-app purchases?
One burning question is how Apple would reconcile a mobile game subscription fee in an environment where "free to play" titles are by far the most popular and lucrative (Fortnite chief among them). It seems unlikely that the company could shift fans of these games from irregularly timed transactions to a monthly fee, so there may need to be a special ingredient in Apple's secret sauce. And it's not clear yet what form that would take.
- Financial news network Cheddar reported today that Apple is working on a Netflix-style subscription service for games, presumably targeting mobile titles for iPhones and iPads.
- While Apple takes a 30 percent cut of app revenue, this shrinks to 15 percent for subscriptions that continue for more than 12 months. So Apple may be able to keep increasingly restless developers in the fold by offering them a subscription route.
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