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Apple : Wants Gamers to Hit 'Subscribe' with Apple Arcade

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09/10/2019 | 04:26pm EDT

By Sarah E. Needleman

Apple Inc. is launching its new Arcade videogame subscription service next week with a $4.99 monthly price that grants access to about 100 titles, an offering that analysts expect to be a tough sell since consumers are used to downloading mobile games free.

The technology company said Tuesday the new service will be available Sept. 19 in more than 150 countries through its App Store. Apple Arcade will feature new and exclusive games, and subscriptions can be shared with up to six family members across its devices such as the iPhone, according to Apple. Unlike most of the hundreds of thousands of free games currently available on Apple devices, those in Apple Arcade won't have ads or offer in-app purchases.

Launching a subscription game service represents a major shift for Apple. Since opening the App Store in 2008, the company has offered users the option of buying games outright or downloading them free, with the latter often meaning players would see ads or offers to make in-game purchases.

A handful of other game-subscription services are already on the market, though these focus mainly on console and computer games. Microsoft Corp.'s Xbox Game Pass, and Electronic Arts Inc.'s Origin and EA Access, cost between $5 and $15 a month. Alphabet Inc.'s Google is planning to launch a cloud-gaming platform in November with a $10-a-month subscription option.

Apple revealed Arcade's price and launch date at the start of an event showcasing its latest hardware and service offerings at its Cupertino, Calif., headquarters. The company, which initially unveiled Apple Arcade in March, demonstrated live gameplay from three games, including a remake of the classic hit "Frogger."

"It will be a challenge to monetize this," Wedbush analyst Dan Ives said. "But if Apple didn't think it was possible, they never would've gone down this path."

Digital subscription services have exploded in popularity in recent years, spanning everything from movies and music to books and news. In the videogame industry, subscription-by-mail service GameFly has been around since the early 2000s, but other companies have been cautious about moving deeper into subscription gaming.

"We're transitioning from a world of ownership to what we call a world of access," said Mike Blank, general manager of EA's subscription services, which had roughly 3.5 million subscribers as of July. EA Access, for console games, launched in 2014, followed by EA Origin, for PC games, in 2016.

Subscriptions are ideal because they provide an opportunity to try a large number of games for less than what it would cost to buy them, said Matt Percy, senior director of business planning for Xbox Game Pass, which launched in 2017. The company hasn't disclosed subscriber numbers but says subscribers play 40% more games than nonsubscribers on average.

"The great thing about a subscription is that it is like a breakfast buffet," Mr. Percy said. "You're going to try stuff you've never tried."

With Apple Arcade, Apple is going after a market that makes up the largest slice of the overall $150 billion game-software industry -- mobile. This year, mobile games are expected to generate $68.5 billion in global revenue, up 10% from 2018, according to Newzoo BV. That compares with $47.9 billion for console games and $35.7 billion for computer games, the research firm said.

Still, Apple's move comes at a time when the most downloaded and highest-grossing games are free and have been for many years. Console and PC games, by contrast, cost around $60.

"I have a hard time seeing this work," Cowen analyst Doug Creutz said of Apple Arcade. "There are a tremendous number of free games on the [App Store], many of which are quite good."

Other analysts argue that if any company can change mobile gamers' spending habits, it is Apple. "For the most part, the services they've rolled out have exceeded expectations," Angelo Zino, an analyst at CFRA said, pointing to Apple Music as an example. "People underestimate how big Apple's install base is and who it caters to."

Though CFRA doesn't expect Apple Arcade to have a significant impact on Apple's bottom line, "we do think it could move the needle in terms of services business overall," Mr. Zino added.

One mobile-game developer contributing to Apple Arcade, Paris-based Gameloft, says consumers are ready to embrace a subscription service for mobile games.

"We see a craving for curated, high-quality content available at a limited price via a subscription," said Alexandre de Rochefort, finance chief of Gameloft, a unit of Vivendi SA. "It's good for the industry to have an alternative."

Other participating developers include Capcom Co., Square Enix Holdings Co., Konami Holdings Corp. and Bandai Namco Entertainment Inc.

Write to Sarah E. Needleman at sarah.needleman@wsj.com

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