Apple's gaming Business Rakes in more Profits than Competitors Microsoft, Nintendo and Sony Combined
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While Apple doesn’t make killer videogames such as 'Fortnite,' or consoles such as the Xbox, Apple's CEO has turned the iPhone maker into one of the world’s largest videogame companies. For perspective, Apple has been able to rake in more profits from games than Xbox maker Microsoft, Nintendo, Activision Blizzard and PlayStation maker Sony combined, according to the Wall Street Journal.
The key is the App Store, its digital marketplace, where the company sells and distributes thousands of games by other companies and developers. Industry global revenue from videogames is expected to almost double to $198 billion in 2024 compared with 2016, according to estimates by technology consulting firm Activate Inc. The biggest chunk of that growth is from mobile games, which Activate predicts will generate $103 billion in 2024.
Globally, customers spent a total of $45 billion on mobile games through the App Store in fiscal 2020, according to Sensor Tower. Almost 31% of that money was spent in China while 26% was in the U.S. Apple's gaming revenue could be hit going forward due to China's crackdown on youth's time spent on playing games.
Three of the top five grossing mobile games in the App Store are from China, including the No. 1 title “Honor of Kings” from Tencent, which generated an estimated $2.5 billion last year from users, according to analytics firm Sensor Tower.
In a nod to how important hard-core gamers are to the company now, Apple introduced its new iPhone 13 Pro last month with upgrades to the screen aimed at giving a smoother video experience. The feature is particularly attractive to those who use it for gaming. Below is a short video from the iPhone event last month centered on ProMotion in context with gaming.
Apple is appealing to a rather small group. Just 6% of App Store game customers in 2017 accounted for 88% of all the store’s game billings for the year, according to court records. On average they spent more than $750 annually. The biggest spenders, who made up 1% of Apple gamers, generated 64% of billings and spent on average $2,694 annually.
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Blockbusters include “Honor of Kings,” which allows users to battle as historical Chinese characters and was the top grossing game last year in the App Store, according to Sensor Tower. Other top money generators are “Pokémon Go,” an augmented reality game based on the popular Japanese anime, and “Candy Crush Saga,” a puzzle game where users match clusters of jelly beans and gumdrops.
The 2020 Epic Games v. Apple trial lifted the veil on Apple’s gaming business and the extent to which gaming is at the center of its profits for the App Store. In that context, it's easy to understand why Epic Games wants to force Apple, either by court order or via antitrust dictates around the globe, to allow them to set up an Epic Games store within Apple's App Store.
At the end of the day, gaming is a huge business for Apple. However, in the big picture, gaming accounted for an estimated $13.5 billion or about 5% of Apple’s overall fiscal 2020 sales of $275 billion. Fifty percent of Apple’s revenue in 2020 came from hardware sales of iPhones. For more, read the full Wall Street Journal's report (Paywall).