The gaming app Apple should really build
The company that has kept gaming at arms length is suddenly embracing games more than ever. Mobile games are set to grow by double digits every year until 2030. But money is part of the reason.
Dear Readers,
Apple’s next WWDC is only 4 days away. Amongst a number of rumored updates regarding its product lineup, renaming the iOS operating system, and a bunch of Apple Intelligence and other AI initiatives, the company is expected to announce a new gaming app.
This comes on the back of the news that Apple acquired the 2-person game developer behind the Apple Arcade hit Sneaky Sasquatch. Per industry insiders, the game after years of being live is still in the top 5 of all games on Apple Arcade. I had a long conversation with a mobile gaming executive yesterday, who has led the development of games for Apple Arcade specifically and has been close to the developments on Apple’s side. We went back and forth for an hour and landed on a compelling hypothesis for the gaming app Apple should announce in 4 days. Hint: it’s not Game Center.
Why is Apple all of a sudden pulling mobile games closer to its chest? For one, mobile games alone are a $100 billion market that is expected to grow at just under 11% every year to reach $165 billion in 2029. Already today Apple makes about $10 billion in revenue from fees it collects from app purchases, in-app purchases, and subscriptions facilitated via the App Store. Estimates peg mobile gaming’s share of that revenue at $3.8 billion. So assuming these ratios simply remain stable, Apple’s revenue from mobile games would increase to $6.3 billion - not bad.
But money is only part of the answer here.
The other is increased pressure from competition and a need to maintain product differentiation of the iPhone. In other words: what can Apple make a part of the iPhone that gives consumers additional value that you could only get on the iPhone, and therefore compel consumers to buy the next iPhone instead of a Samsung S25 Ultra or the next Google Pixel?
But there’s another answer: increased engagement with the device. Video games are the most effective media at engaging consumers. The average engagement of a social media post is about the time it takes to blink. The average engagement length with a video game, for example on Roblox, is 11 minutes.
So what does more consumer engagement with the iPhone get Apple? It translates directly into the product differentiation above as people will spend more time using their device if they find it valuable. But I think the bigger and more compelling reason here is the behavioral data Apple could glean from people playing video games that the company actually owns or controls.
Behavioral data from video games is among the richest and most powerful data sets you could imagine on consumers that allows to inform and train intelligence across other services as well. This is the exact reason why companies such as AppLovin and Niantic had mobile games as a part of their portfolios for years - so they could train the most powerful AI for programmatic advertising (AppLovin) and the best spatial computing software (Niantic).
If you have tried Apple’s Apple Intelligence features, you have felt first hand that the company is pretty far behind in the AI race compared to Microsoft, Meta, Amazon, and obviously OpenAI and its peers. That doesn’t mean we should count Apple out. Keep in mind, there are currently almost 1.4 billion active iPhone users worldwide. If Apple can use video games on this platform to increase engagement and use the rich behavioral data to inform its AI services across those devices - that unlocks tremendous revenue potential far outpacing the growth in App Store fees it can collect.
A central gaming app that isn’t game center
If it’s not Game Center, or Game Center reloaded, what gaming app should Apple announce in a few days? What the gaming executive shared with me based on his many conversations with the Apple Arcade team over the past 2 years was that there was a noticeable shift from engaging with Apple’s own entertainment IP being entirely off limits to Apple slowly but actively asking for game developers to pitch their ideas for mobile games leveraging the company’s growing roster of IP.
I think this is where the answer lies to what Apple should do. Severance. Murderbot. The Studio. Foundation. Silo. Ted Lasso. Not to mention Stillwater or Shape Island for the kids. Apple TV+ has an impressive catalogue of movies and TV shows - it’s IP that lends itself perfectly for game development. Apple could bring inhouse game development (or still work with 3rd party developers) to build mobile games using its own IP exclusively for the iPhone. These new games would come either pre-installed or installed as they become available directly on your iPhone bundled under one gaming app.
No downloads required, available exclusively on the iPhone.
Add to that a feature that game center users always wanted and never got, and Apple might just have a winner on its hands: social gaming and networking. The latter would likely require Apple to slightly loosen its restrictive stance on data privacy, but where there’s a will (or enough pressure) there’s a way.
In just a few days we’ll find out how close or how far off this idea is from what Apple is planning on doing. Be sure to subscribe below as we will be calling balls and strikes here.
Here are some other important news for you to keep track of.
Gaming use surges for 80-90-year olds
Did I mention already that gaming is hugely important to any company (see above, Apple)? Well, in case anyone needed further evidence the Entertainment Software Association (ESA) just released its latest report on gaming habits in the United States. Among the many interesting findings: the number of 80-90-year old people that play games at least once a week rose by 36% and while gaming’s penetration of younger audiences is higher, in terms of absolute numbers there are more folks playing games aged 50 and above than 18 and below.
Gaming truly is the only media that is multi-generational. You can read the full report here.
Amazon is turning the OpenAI drama into a movie
The year is 2023. In a stunning turn of events, OpenAI’s CEO Sam Altman is first fired from his job, then his white knight Microsoft announces Altman and OpenAI employees would all get hired at the tech giant, only to see Altman be reinstated as OpenAI’s CEO while core members of his founding team (like CTO Mira Murati) left the company shortly after. As Ralph Waldo Emerson said: “When you strike at a king, you must kill him.”
All this drama and the mind boggling amounts of money involved in AI are reason enough for Amazon to turn these events into a movie. MGM Studios is tasked with the production with the working title “Artificial”. Actors Andrew Garfield and Monica Barbero are rumored to be in the mix to portray Sam Altman and Mira Murati.
Reddit sues Anthropic over illegal scraping and use of its data
Social network and community site Reddit has sued AI company Anthropic over illegal scraping and use of its data to train Anthropic’s AI chat Claude. While more and more companies fight back over their own IP and data (the New York Times has an ongoing lawsuit against OpenAI), this situation is especially delicate for a couple of reasons. One, Reddit has a licensing deal with OpenAI in place that sees Reddit receiving licensing fees for its content of an estimated $70 million. And two, a big part of Anthropic’s brand and appeal to big corporate clients is its explicit focus on privacy, governance, and being the good guys with a conscience in the AI arms race. Reddit is directly challenging this notion, calling Anthropic’s emphasis on trust and safety “empty marketing gimmicks” and that the company “bills itself as the white knight of the AI industry” while being the opposite of that.
This week, I was on the road to give a talk to the executive management and board of directors of a large European bank. The topic was “The Future of Finance is Human”. We explored the intersection of Finance, AI, and Gaming - I’ll be sharing the key headlines of this talk soon, so please subscribe and share to not miss it.