Apple (AAPL - Free Report) recently unveiled its subscription-based gaming platform, Apple Arcade, which will offer more than 100 new games beginning Sep 19. The service will be available to Apple device users for $4.99 a month.
The iPhone-maker’s aggressive pricing coupled with a strong content lineup is expected to be a game-changer. Apple Arcade is set to bring a curated selection of iOS titles, highlighting both familiar AAA franchises as well as emerging indie games.
The new service is likely to boost Apple’s footprint in the subscription-based game streaming space, which is currently dominated by established services from the likes of Electronic Arts (EA - Free Report) , Microsoft (MSFT - Free Report) and Sony (SNE - Free Report) .
Notably, Microsoft’s Xbox Game Pass is priced at $9.99 per month while Sony’s PlayStation Now is priced at $19.99 per month. However, EA Access is priced similar to Apple Arcade
Moreover, relatively new services like Amazon (AMZN - Free Report) Twitch, currently priced at $10.99 per month, might find it extremely difficult to match Apple Arcade’s rock-bottom price.
Notably, Apple’s Sep 10 announcement of new iPhones, iPad, Apple Watch 5, Apple TV+’s pricing and date as well as Apple Arcade helped the company reach $1 trillion market cap once again. Moreover, the company has returned 41.4%, better than S&P 500’s rally of 18.3% on a year-to-date basis.
Apple’s Solid Game Lineup Poses a Threat
Apple Arcade is set to offer games including Ballistic Baseball, Overland, Exit the Gungeon, Pac-Man Party Royale, Skate City, The Enchanted World, and The Brandwell Conspiracy among others.
Games from AAA developers like Konami's family-friendly Frogger in Toy Town and Capcom's underwater platformer Shinsekai: Into the Depths are expected to be released soon on Apple Arcade.
Moreover, EA’s SimCity franchise creator, Will Wright, is also rumored to be developing games for the service.
Although, Apple Arcade games are limited to iOS, Mac and Apple TV devices, users can download and play them offline. This enhanced accessibility is a key catalyst.
Competition Set to Intensify with Google’s Entry
Per Newzoo report, the global video game market is expected to generate around $152.1 billion revenues in 2019, up 9.6% year over year. Moreover, consumer spending on games is expected to witness CAGR of more than 9% between 2018 and 2022. This estimated increase in consumer spending bodes well for companies offering subscription-based services.
The solid growth prospects are attracting tech giants like Apple, Amazon, NVIDIA and Alphabet (GOOGL - Free Report) division Google. The entry of the tech giants is expected to intensify competition for incumbents like EA and Activision Blizzard.
Apart from Apple, Google is a potent challenger, courtesy of its upcoming Google Stadia platform. Its lineup includes a ton of AAA heavy hitters as well as indie games including Assassin's Creed Odyssey, Cyberpunk 2077, Destiny 2, Doom Eternal and Watch Dogs: Legion, as well as smaller titles such as Gylt and Orcs Must Die! 3.
Google is also developing a basic version called Stadia Base, free for users, expected to be launched in 2020. Google Play Pass, which is rumored to be a $4.99 a month subscription service, is expected to compete effectively with Apple Arcade.
Apple, Microsoft, Amazon, Sony, EA and ATVI currently carry a Zacks Rank #3 (Hold).
Google parent Alphabet currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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