Why Apple might reposition the Apple TV as a gaming console

Here’s the case for making games the focus of the Apple TV’s next chapter.

When you think of the world’s biggest brands in video games, what companies come to mind? I think most people would come up with names like Sony, Nintendo, and Microsoft. It might therefore come as a surprise that Apple, yes Apple, is one of the top five companies in the gaming industry. A report in 2019 indicated that Apple was the fourth biggest company in the gaming industry, even beating out beloved Nintendo, and nearly landed the number three spot. And this was before Apple debuted Apple Arcade, it’s subscription gaming service, last Fall.

Although Mac gaming has a long history, everyone knew that Windows was the platform to be on for gaming on a personal computer. And Apple has had no product to compete in the console gaming market, apart from its short-lived Pippin console in the mid-90’s. (That product was quickly discontinued after selling only 42,000 units.) The truth is that historically Apple never had much interest or competency in gaming. In fact, Apple sort of fell backward into being one of the biggest gaming companies in the world when it released the App Store in 2008. The iPhone had taken the world by storm a year earlier, and was already beginning to completely upend the mobile phone market. Third-party software developers, including game developers, were clamoring for the opportunity to write games for the iPhone. When Apple finally opened the virtual doors of the App Store in 2008, games were there on day one.

The Apple TV device has now been with us since 2007, but it’s long lacked a cohesive direction. Apple long referred to it merely as a hobby. Those of us who saw the potential of the Apple TV, yearned for an App Store and games for the Apple TV, but it wasn’t until 2015 that Apple finally brought the App Store to tvOS. And when it did, it initially torpedoed any opportunity for the Apple TV to be a compelling games platform. In those early days of the tvOS App Store, Apple limited the inital download size of apps to 200 MB. That’s not a lot of room for games which often need gigabytes of data. Apple also initially mandated that games for tvOS had to be playable with the Apple TV’s Siri Remote. Developers could also target full game controllers, but every game had to support the Siri Remote. These moves turned off a lot of game developers. Fortunately Apple eventually abandoned those requirements.

The Apple TV continues to be a device without a decisive reason for its existence. These days many of the new television sets you can purchase from leading brands like Samsung, LG, and Sony have onboard support for AirPlay, and come with the Apple TV app pre-installed. Some even come with the Apple Music app built-in. There are still some reasons why you might choose to purchase an Apple TV, but there are fewer reasons to buy one now than ever before. That’s why I think one possible new direction for the Apple TV could be as a gaming console via Apple Arcade. Here’s why they might want to do that:

Apple has faced a problem for the last several years, albeit one that any other company would envy: it’s iPhone has been massively successful, arguably the product of the last decade. The problem for Apple is that a tremendous amount of its revenue comes from that one product, around 50% of Apple’s revenue as of its most recent quarterly earnings report. For the last several years, Apple has been looking to diversify its revenue stream so that its fortunates aren’t completely tied to how well the iPhone is doing. That’s why if you’ve followed Apple you’ve heard so much about Apple’s Services business. Services includes a lot of things like Apple Music, iCloud, Apple Arcade, Apple TV+, App Store and Apple Pay revenues, etc. Three years ago, Apple’s Services business represented 13% of its revenue. As of the most recent quarterly earnings, it’s up to 23%. The global video games industry is worth about $151 billion and estimated to continue to grow. If Apple were to continue to increase its position in that industry, it could be a lucrative avenue of growth for its Services business.

Apple also has, in Apple Arcade, a gaming service that could be well positioned for the future of the games industry, they just have to capitalize on it. More of the world’s software and entertainment industries are being pushed into subscription services. Software-as-a-service is replacing the old software sales model. Streaming video services are revolutionizing the way we watch TV, something Apple seems to be well on its way to meaningfully participating in. Subscription gaming is likely to be the next big thing in the video games industry. Apple Arcade offers over 100 games at just $4.99 per month. That’s already an attractive price, but it gets even better since that one price can cover unlimited gaming for up to six family members via Apple’s Family Sharing service. And Apple Arcade games can be played on your Mac, iPhone, iPad, or Apple TV. You can even stop play on one device and pick up right where you left off on another.

If Apple’s going to refocus Apple TV on gaming, here’s what it needs to do:

An Apple-Designed Gaming Controller

For the last several years you’ve been able to pair third-party game controllers via Apple’s Made for iPhone (MFi) accessories program, and recently you’ve been able to pair Xbox and PlayStation controllers to your Apple TV. Those are great for gamers, but to really tell the world you’re serious about gaming, you need your own controller. Apple needs to develop its own game controller that developers can target. And this wouldn’t just benefit Apple TV gamers, but would pair with your iPhone, iPad, and Mac as well. Apple could sell a lower cost Apple TV with a simpler remote, or a more expensive bundle that includes the Apple Game Controller.

More Frequent Hardware Updates

The 4th Generation Apple TV that brought the App Store to tvOS launched in 2015. In 2017 we got the Apple TV 4K. Since then we haven’t gotten any additional Apple TV hardware. It would be great to get a gaming edition Apple TV update on a more frequent schedule, say every year or two. The Apple TV has always gotten an older version of Apple’s A-series processor. That makes sense for a lower cost entry-level Apple TV. But a gaming edition Apple TV should have Apple’s newest A-series chip so that game developers can bring truly impressive games to Apple Arcade.

An Apple Services Bundle

Right now if you want Apple Music, Apple Arcade, Apple TV+ and Apple News+, you have to pay for each of those services separately. That forces to customers to pick and choose lest they wind up sending a large chunk of change to Cupertino each month. An Apple Services Bundle that includes all four services at an attractive price could bring more customers to Apple Arcade.

Make It A Priority

To truly compete in the games industry Apple needs a gaming czar who is good at communicating Apple’s games strategy to the public. Someone who can do for Apple Arcade what Craig Federighi does for Apple’s operating systems keynotes each year at WWDC. Apple also needs to find additional ways to woo leading games developers to make Apple Arcade a priority for them.

Apple is probably never going to be the thought leader in video games. The games industry is a crowded market with several longstanding players that have made their mark. But Apple could dramatically increase it’s percentage of revenues from the games industry with a few tweaks to its current strategy. We may find out as early as this Fall if Apple has any inklings in that directions. That’s the time of the year we’d typically see new Apple TV hardware announced, and that would also be the one year anniversary of the debut of Apple Arcade. A perfect time for Apple to update us on its plans for gaming.