In a note to clients — as noted by Apple 3.0 (a subscription is required to read the article) — the Oppenheimer investment bank says “Apple management is committing to building Apple hardware as the best HD gaming platform.”
From the report: Apple Today: Based on our estimates, App Store has generated commission of $15B from mobile gaming publishers in the past 12 months, making it a top 3 “video game” company by revenues. Its revenue accounts for 17% of global mobile game market in 2023. In comparison, Apple’s position in HD gaming (AAA and AA games on PC/console) are negligible, with less than 2% market share.
HD Expansion A Necessity: We believe Apple is pivoting its hardware and software designs to capture new gaming revenue. Notably, the slowdown in mobile gaming casts headwinds for Apple’s mix shift toward more high-margin service revenue. We see ample opportunities for Apple to capture similar high margin revenue elsewhere, notably in HD gaming.
Favorable Industry and Technology Trends: We see a number of key trends favorable for Apple’s entrance into AAA gaming: 1) better gaming experience on ARM hardware, catching up to x86, 2) desire for publishers to develop dual SKU (mobile and PC/console), 3) desire for players to access games across multiple platforms based on where they are.
Market Expansion: We estimate that by 2028, Apple will have an installed base of over 1B HD gaming-ready devices across iPhone, Mac, and iPad, compared to a projected global console installed base of 300M (Xbox/PS/Switch). High-end Android and Windows on ARM devices will also provide additional installed base for developers and publishers.
Risks and Challenges: We see the following risks in Apple’s expansion in HD gaming: 1) hardware and software compatibility, 2) developer relationship (Apple needs to build goodwill), 3) developer inertia and player royalty to Windows gaming, 4) competition from Android and more PC-like handhelds.
