Future of Apple Arcade? | Expert Analysis

everybody welcome to Game acres I'm Joachim and today we will be discussing apple arcade which launched on September 19th earlier this year in our conversation today we want to talk about number one initial thoughts on the service what do we think of offering in the games secondly who is the audience for the service and third features prospects for how big this service will be for Apple in apologies I'm a little bit sick today which is why my voice is kind of screwed up but to discuss this topic in more detail I'm joined today by Eric cress and Steve pally hey guys could you briefly tell us about your backgrounds I'm sure I guess I'll start so my name is Steve Alli I work for pixel berry studios and we're the dead studio that makes choices stories you play on mobile and so we do interactive fiction basically prior to that you know I spent some time in graduate school I am a long time games journalist as well so I started a website called slide to

play and we were among the first to cover basically iPhone gaming we launched in fall of 2008 so pretty darn early as far as this ecosystem goes so and before that actually covered mobile games for GameSpot of all things like 2004-2005 so we're talking about like the feature phone era so many many varieties for instance chess and snake hunt that sort of thing but I've been involved in mobile games basically since 2004 and one capacity or another and for the last four and a half years and working for pixel bury in user acquisition data analytics and product management so you know I've gained a fairly comprehensive understanding of how free-to-play works and and in some cases doesn't work but I'm also coming from like you know in like an indie game developer space because I used to cover all those games and I still play many of them great all right Steve is a doctor of philosophy I mean a doctor of

philosophy how far have you fallen right so here's the thing some would argue that I've actually risen [Laughter] highbrow highfalutin stuff like intellectual stuff which yeah I don't possibly can't possibly understand yeah no I think you can it's it's talk about non-viable industries it's being disrupted along with indie gaming right but yes I did get a PhD in political science from UCLA so I did a lot of actually quantitative stuff while I was there and that has helped me kind of understand free-to-play I'm from a data analytics perspective so that's what I like to tell people it actually does kind of fit together not really but I'm glad I did it hey you know whatever it was seven years of my life Jesus that's a super nerdy all right so oh yeah have I ever done my

background on the podcast I don't think so all right let's do it quickly so I worked at I worked at EA for seven years and it EA I was did Corp dev I did FP a financial planning and analysis I did forecasting in North America I did product marketing for a game called black and then I did brand marketing for EA in general so over my seven years stint there super painful as everyone knows that worked at EA it's a tough place to be loved the people hate the politics etc etc etc but the cool thing is that I got intros - most of the execs during that time like John rocket ello Frank Gibeau and all the name-dropping that is required here but and learn the business from out more of a high level and kind of did a lot of the strategy work while I was there because it wasn't a strategy group at the time that was formed by when my buddies Crisco later on so after that I developed you know got a great expertise in the console space and PC

and so I went to Wall Street and started covering video games for investors at a company called Bay Street and I did that for six years and then kind of the bottom dropped off in o8 with you know the market crash and things got a little bit sketchy so I had an opportunity to go to Kabam and I was like VP of corporate strategy at Kabam it kind of the goal was to understand and learn free-to-play because I don't know I didn't know jack about it and it was like kind of my PhD and free-to-play some pretty smart guys over a Kabam did that for two years and then I branched out now I'm doing my own consultancy and my own consultancy is primarily related to the publicly traded guys within big investors hedge funds primarily but I also do consulting I did a project for Sega gree doing a project for A to B for Amazon I'm actually now doing a product for Warner Brothers so I have to keep my comments about Warner Brothers to myself I suppose not anyway so but my primary goal is to figure out what's happening with the big guys and that's kind of what I do yeah

this is from my perspective you're definitely you know my favorite on the Deconstructor podcast and just my favorite finance bro in general even though we just met so hold on I got one update man I don't know if I said this in the podcast but I called this UB something cold man this is almost as bad as the glue thing so Ghost Recon just completely screwed the pooch this time and they just pushed out the three games they're having coming out in q4 so their stock is literally down from 75 down to like I think 40 now so I've got freaking annihilated so feeling good about that one all right Apple arcade I thought we could first start by talking about high-level thoughts in terms of their current games and the in the service itself in terms of the way that it presents itself on the phone and so Steve do you want to start in terms of like wait what your thoughts are yeah I mean so I've been playing Apple arcade I signed up soon as was available and I

mean the first thing to know about Apple arcade is that like it's right there staring you in the face on the App Store you know it's like there's an there's an icon right there I think you know so I think a lot of people are probably trying it out and I think I just got billed for the first time five bucks I've played about thirty of these games and I'm frankly astounded like the rate at which Apple is shoveling new games onto the pile it's like I get a notification every now and again it's like oh another ten games dropped or something it's just like oh my god like how many of these are you like holding and reserve like what the pipeline even look like you know it must be significant but yeah I've played 30 of these not all of them very very extensively and I found a few that I think are really awesome most of them are not awesome at all but it's like there's so many it's kind of like to a certain extent commoditized and I think

I'm sure we'll talk about that you know some point during the course of this call right and from my perspective like I feel like I've played the majority of the games I mean I don't know my phone is just filled with Apple arcade titles but you know for me as well if I'm being honest this is really like an indie gist fest it's just this is like so much like niche like indie content you know and I don't love the titles I've probably played oceanhorn and that pinball the RPG pinball game the most but yeah temple wizard pinball was right I like what I like pinball wizard both the titles are okay not great I think the pinball game could have been great but the controls are just like it's not they're not precise enough at least you know when I play on my iPhone 11 and iPad pro but and I know you had mentioned that you like shinsekai and pilgrims and you know this games also like I can see why people would like

them at least when I played them you know I wasn't I was in the mindset of wanting to like think very much yeah right you don't want to like go into this sit down for two hours and have an indie gaming experience right right so it's like we all have kids we all have families you know it's like I don't have any time like yeah it's not really that time of life anymore so I get I can't buy a boost to get more oxygen it's like no you can't like you're dead and that's it so I don't know so the big takeaway from me really is that for me there wasn't a single title I'd be willing to pay five dollars for so you know if I hadn't got Auto and roll post the trial I would not three upped past the trial so for me I think that you know I I think Apple arcade is well-intentioned I do think that the intentions and motivations behind Apple arcade are good but you

know the the barrier between free and in one set is fairly substantial and there are so many competitive alternatives now right so whether they're hyper casual games that are arguably as fun or even more fun than then the games on arcade or you know free-to-play games like clash royale which I think are so much more fun than the other titles that I'm seeing on a couple arcade so ultimately I think it makes this the service a hard sell so you know from my perspective I suspect the majority of Apple owners will not opt for Apple arcade all right I mean everyone knows my opinion on an apple arcade so I'm not gonna get in sense cuz Mishka is not here but yeah I mean I agree these all these games are targeting primarily Indies right and I think there is a fundamental understanding of what Indy is Right Indies are just by nature very niche for

super dorky people like us on them on the podcast and probably people everyone that's listening to this podcast but mass market people don't play these super hardcore like platforming games or action-adventure games it's just not it's just not broad enough and I just think there's just very people that are interested in playing like pilgrims or Halawa or any of the other garbage right sorry not garbage so I was looking I was trying to get some like data you know because I you know a lot of times we're just talking out of our ass right but like how many I looked at the most popular games downloaded in calendar 19 I know this is not apples to apples because we're not we're talking about free games but it was like home escapes roblox subway surfers tomb of the mass which I don't know garden escapes word escapes and pub G and matching ttan those are like the most downloaded games that have made over a million dollars right in the year and this is where the audience is and we don't it's like

shooters puzzle games and blocks right like no none of these games exist on this service at all right they're all just like super niche indie games and it's it's it's bizarre and you know I think taking the shotgun approach was a mistake for Sony for Apple right I think yeah you know but more of an HBO type model maybe with amazing content that attracts the broadest audience possible you know I you know Joseph made this point a while back is that you know focusing on like five to ten amazing experiences that really make the pro make the platform unique would probably been a better idea really good exclusives right right right yeah so I just don't think that leadership of Apple arcade you know the guys that are handing dev relations and stuff really kind of understand the dynamics of the market at all so you know they should reach out to the experts of free-to-play and figure out like where where the genres are that they could play in another solution would be like you sign

up roblox right and and you don't necessarily take robots holistically you basically just ask them to provide now this is against robots whole whole philosophy so I know I'm yeah I know I'm talking crazy taking my money yeah I know I'm just I'm just I'm just throwing it out there as an option it's maybe it's not roblox as someone else but you could create a experience in the robots world universe that is unique to the platform that people want are compelled to play things like that you know so or you bring a big IP like Marvel or Star Wars a game that you only can get on that service you know of course this is far more risky because you're gonna be spending a lot more money and a lot more dev time but again you have to create something unique for the subscription service that that it has the broadest reach possible so I you know and even if you were to execute across all this I could you know probably go through a litany of things why I think it won't work but but the way they've approached it this the way they approach it now is just it's an epic fail right there's no way that this

can be successful unless they continually spend more and more money you know duping these developers into making more games so I wouldn't call it duping the developers I actually would not well paid them out extremely well I mean and I know just anecdotally there's probably like five to ten you know friends of mine who are like thank God for Apple they totally saved us yeah no I totally agree like most of the developers on there are very small shops that like don't have the resources don't have the expertise to like get into free-to-play cuz as we know free-to-play requires like extremely specialized skill sets and like a lot of people and a lot of money to do you a you got to do data analytics you have to do all this stuff right that I've been learning how to do in order to scale and actually make the model work and like a lot of developers are just like I just want to make games like I want to deal with any of that I don't know how to do it like I don't want to get venture funded

just like I just want to make weird little games there's look if there's actually quite a few developers look I don't I don't disagree with that notion but what happens when the music stops right what happens when Apple pulls funding right these these developers have not developed any expertise that's actually marketable in a reasonable sense right they they haven't desert they haven't just develop the skills of microtransactions and you know live ops and UA and all this other stuff you know it's like this could be an ecosystem I mean assuming the service continues and is profitable and generates money which is you know we will talk about that later yeah you know this would be the way for them for those type of developers you know the small indie premium guys to actually have a business and yeah I'm telling you there's so many guys I know who are on the ropes and so here's the thing them Apple is is writing big checks right they're writing big checks and if you have a small shop like sub-10 people something like that even in the US and Apple writes you know you're able

to do one to two these games a year or something like that probably let's call it one a year right you have a good relationship with Apple and they write you a two to three million dollar check each time it's like that's viable believe it or not that's actually you know depending on where you're living and yeah there's no upside right there's no upside but you can still make a living yeah what happens when the checks start stop coming well Celeste let's talk about arm again me it's frickin Armageddon right well I don't I don't know that it is right where is that alert where's the funding gonna come from now where are they gonna get million or two million dollars to develop some tchotchke game that only like a hundred thousand people in the u.s. want to play like a lot like a lot of these guys have developed basically cool front ends right and they can go to a Zynga right or they can go to agree or wherever else Nexen you know and get hired as game developers because they actually have expertise in game development they don't have any of the back-end expertise right

particularly that's good I like said ugly you're training the next generation of real game developers yeah real game developer requires like a huge team you know no III understand that that's what I'm trying to say but anyway what's uh all right let's talk about audience so who do you guys think the audience for Apple arcade is if there's an audience like who are the who are the people that are gonna be paying this $5 a month for Apple arcade start with II Steve I think it's gonna be guys like me guys who are nostalgic aging and you know have been perhaps in the indie development scene themselves orange airlines yeah for sure yeah right I'm uh I'm on the propecia so it's okay good yeah I you know what's up basically

yeah guys who appreciate this type of experience you know and and you know perhaps are into playing Triple A games like big sprawling you know for single player games on ps4 or steam you know my Steam library has 300 games in it some of which I've spent hundreds of hours on I'm just one of those guys you know and I know there are guys like me not that many of them I know can't scale that far right but you consider that worldwide Apple has something like a billion devices something like that not nine hundred million nine yes well later but yeah let's go down two orders of magnitude take one percent of that nine million that's probably the top end for this in subscribers I would say absolutely top ends realistically probably less than that and are you gonna continue your subscription I am actually gonna continue my subscription because I'm still playing this stuff I'm still playing shinsekai and yeah

pilgrims you know I only you know play a couple minutes every couple of days when I'm like sitting around you know waiting for waiting for somebody else to do something right but yeah yeah I would agree with you on audience that the audience for this are the indie lovers who like the high quality but very weird sort of niche experiences yeah so there's triple-a and then there's triple I you know just like very very high quality just weird indie experiences that you find mostly on Steam but all the platforms so Xbox Sony Playstation switch are actually concentrating its on this segment as well right but I guess the argument I would make is that I think Apple could have tripled at least tripled their audience if they would have not only focus on some of this stuff but broaden the audience by actually focusing more towards like a kids and parents audience with like educational content and like you know

the educational content you could spend like I don't know I think it was reported they spent five hundred million but you could spend two hundred million and make a extremely compelling service by a bunch of parents gonna pay $5 a month more you know a lot of yeah educational stuff for their for their kids and so yeah I feel like that would have been in my in my opinion a much more lucrative and much more useful audience to go after I don't disagree with that at all I think that makes a ton of sense and I you know I wouldn't surprise me that much if the service evolves in that direction over time I think given the outlay that Apple has already made they're not gonna pull the plug in like a year right now they're not gonna pull the plug in like three years probably you know it depends but I guess the other thing to know go ahead yeah I mean the challenge here though I think is that they're just not a lot of people making those type of family-friendly games anymore right there there's no market for it you know the indie like hardcore seem like you're you you love is like

you know it's really done by steam very well in the sense of you know creating an ecosystem in which you can find these crazy niche things that you can play which is super cool and I'm not I'm not really big I'm not trying to dig on that stuff I think it's really cool and people like love it I just don't think it's a real big market opportunity but for the casual audience I think the those games are kind of all on mobile right now on free-to-play and and I think there's not a lot of premium games out there like you know being developed for that type of audience so the one anecdote I always think about and a lot of times we're on the podcast we don't really have a chance to explain ourselves I just have these opinions that come out of nowhere but so what back in the old days man 98 98 is when I started looking at video games when I was at Alex Brown then we were looking representing Broder button and this is all gonna come come back to what we're talking about I trust trust me and a time there's like the two biggest publishers were Electronic Arts and brøderbund and EA

was looking to acquire brøderbund and the whole goal was basically to get out of core games and expand sorry expand beyond core games to the educational market with parents and kids right because at the time you know the target demo for videogames have I said probably a million times of this podcast was like 18 to 26 year old boys basically so extent expanding the demo was actually really important now EA pulled out of the deal and why the primary reason is that education software could not drive the premium prices and therefore the model would be broke when when we tried to sell the stuff you know cd-rom education software commanded by like twenty to thirty dollars well triple-a was around fifty dollars at the time and and then what happened to brøderbund they were sold to the learning company which is a similar company that did case of software and reduced their staff by fifty percent and I think ultimately none of the companies even exist anymore so kevin o'leary right thanks that guy yeah so again a lot has changed since then and it's not quite apples to apples

right now but like the demographic has expanded beyond all expectation in terms of who's playing games these days you know we in the 3ds broaden the audience beyond the core women old people etc but again as we look at the market today as we sit like the Mart all the game and content is being developed for eighteen to forty four-year-old nails because that's all that's really active within the install base of console and and PC and the certain said mobile and so and the reason why is relatively simple is like the mass market is super fickle they go from one shiny thing to another you know parents and families are far more cost conscious than core gamers in terms of spending on games and casual games by definition I start casual gamers by definition don't spend money on games because they're casual right like this is exactly what happened to the we write the Wii was being sold to like insane amounts of volume to like eighty year old grandma right in the in the old folks home like how many pieces of software are they actually gonna purchase you know none right so anyway

the notion that Apple can actually target parents and children I think is flawed from the get-go because they're less likely to convert this audience first of all and there's no content to provide them I mean unless people start creating that content specifically for this right yeah it's just possible given the deep content but because there's really no one that makes this content anymore besides Nintendo so there's another opportunity for them right you basically somehow partner with Nintendo to stop making these stupid free-to-play games that don't work yeah that's your like your linchpin content provider for this service yeah then I pulled up right let's just create Nintendo content for this and they become like the you know the primary you know content providers that would actually be awesome yeah I don't have to disagree with you on this cuz like if you if you look at there's companies like age of learning with ABC Mouse that have been on an absolute tear and in China as well like the kids educational

market in China is like massive so I just not talking about China at all yeah I'm not talking about time but I'm just saying that there there is a latent desire for a lot of parents to buy educational content that's what that's why I disagree I just just I just don't I think people are it's chasing rainbows and unicorns when when you start talking about education software and I'll be happy to be contradicted and then tell me where I'm wrong here just look at agent learning I'll look at it but yeah I've heard of that and I think the missing component from you know 20 or 30 years ago which what you were talking about earlier is is just that alike the research basis for it right yeah oh go ahead sorry if you have one of these companies that has a bunch of like decent studies behind it then and they market it properly then I think parents are gonna be like all over it you know it's like Hooked on Phonics you know yeah no I would go not so much in the Nintendo direction but more of the age of Learning Academy problem science math antics Osmo more than that

direction so but you're talking you're talking about B to C right they're set B to B you're talking about like well these these services are selling directly to the - mm-hmm parents mmm all right I'll look into it okay all right sorry I'm sorry sir but but but this is education though I'm we're Tom we're talk about like entertainment right detainment yeah edutainment right yeah yeah I don't see any of those games like cropping up on the revenue you should check out is a there's actually a game called prodigy on unlevel that that's been on a tear as well prodigy yeah it's like a it's like an RPG math game and that yeah there's kids in my you know my kids elementary school you have to like force them to stop playing God anyway all right so strengths

weaknesses areas of improvement in terms of like the the Apple arcade experience what do you guys think are there things that that they should be doing to improve the service maybe starting with you Steve yeah so I think the points that have already been made in terms of curation are entirely correct it would probably make more sense to like lower the throughput right because right now they're literally shoveling new games onto a growing pile alright and that just creates shovelware right literally it's like you know just like throw some more coal on the pile and this burn it up and then next week like just you know more on top of that and yeah I think if you do that then the value goes to zero right which is a which is a real concern and and Apple just has to subsidize it forever which actually they can do they can subsidize this forever to be clear they're sitting on two hundred fifty billion dollars in cash right well they can if they like we'll

talk about a leaner but they may actually not even need to I mean this may actually be a profitable service I mean I think it can be we can we can talk about that yeah especially as part of a bundle right a services bundle but yeah so so being a little bit more selective about curation I think is a very good idea you know I don't know if they're considering introducing like you a or anything like that for the service they totally could if they felt like it you know but I think they're probably gonna see how this grows organically first if it grows organically like I assume that they're they've gotten a nice pop just from putting the fricken icon you know along the bottom of the the App Store right but from there you know I'm not exactly sure where it's growing so those are those are those are two things I can think of yeah I mean I

would have degree I mean I think it's a great value for you know the hundred thousand customers that care about any games but give it you know given the customer appeal is very nice you know I'm not sure you can really build a scalable business per se here you know in the model for developers seem to be work for hire I would have expected very very little back-end revenue for most of the publishers or developers if there is back-end you have to get the incentive structure right otherwise you can really screw yourself so like the word on the street has been there is a back-end and is incentivized based on quote-unquote engagement right and Google's version of this school has a version of it to you I forget what they've calling it right but it's some copy complicated formula based on play time and if you do that your risk incentivizing developers just me taking like quests you know so super grindy stuff you know they probably don't how to do it right so it probably

ends up just tanking the quality of these games and and talking to developers who have looked at this you know it's like well is that gonna incentivize developers to like put in extra frames of animation just to like stretch out you know the amount of time that people are playing and stuff like that or like introducing loading screens that aren't strictly necessary you know it's like so you gotta watch your incentive structure on the back end yeah I think another strength is the auto-renew you know I said earlier it's a really only hope for this service is they put an auto renew future feature that customers were big at it forget about and continue to be charged without knowing because $5 kind of falls off the radar to some degree oh yeah right so since ocean in general is largely driven by lap subscribership and you know I'm coming from the feature phone era where do we just printed money against people like forgetting that something was was being built by Verizon you know every single hunt just got

rolled into the bill right and and what they did was they created a system that you can't cancel it was diabolical right because if you cancel then you lose access to all that content for that month so you literally have to cancel like 24 hours or something before the next up next period right right what happened I forgot to cancel that was charged an extra five bucks you know yeah and the son became Duke by my own prediction and that the sub mechanics and unsub mechanics on on on Apple devices it's not easy you have to go into like I think three different menus in order to actually do this from the device it's a lot easier on Google which is another reason to doubt you know Google doing a fast follow here and in my opinion yeah I think for me that it's it really comes down to the value in terms of the key weakness it's like there there isn't enough like if if they did more like what Google's doing with by having apps or again whether it's

kids educational content or something else it'd be a stronger value for me but to me the main weakness is just the the content scope which is you know really focused around Indies and not having enough value for a broader audience yeah so then let's let's kind of wrap this up with prediction so how how well do we think this service is gonna do long term and what are your thoughts maybe start with you Steve right so for every 1 million subscribers right Apple is gonna get sixty million dollars a year from this thing if my basic math is correct so again if your top end is nine million and I think it is you're looking at quick math you know roughly five hundred and forty million dollars a year something like that right and and you know if you as a white item that's not very exciting for Apple if you think about it in other terms right if at some

point the introduces services bundle where you get Apple music Apple TV Apple News Apple arcade and whatever else they come up with for some added amount against like buying those services piecemeal right and then this becomes like an incremental upsell to that so you get five percent more juice out of whatever that bundle is that could be potentially a much bigger deal right um another way in which this can pay dividends he is basically brand marketing right it's Apple saying hey like we're the we're the platform for creatives you know and they've always done this for decades it's like you know we want to do desktop publishing we want to be the headquarters for graphic designers you know with GarageBand we want to be the headquarters for you know like indie musicians for instance people just screwing around right we want that to be a major use case and like indie game development it believe it or not is

like a segment that is growing for creatives you know like people who don't even necessarily make viable games on any platform right but just kind of enjoy doing it like there aren't that many of them but it is growing right I've been to like IndieCade here in Los Angeles for I think five or six years running and that thing is getting bigger and bigger and there's more of them all over the place right so there is like kind of bad element to where it's like yeah we can subsidize this for some period of time and we don't care cuz we're sitting on 250 billion dollars in cash right and we're not Brookshire half away we have to find like ways to actually deploy this money and build businesses right so maybe we can pay ourselves back by making Apple you know just incrementally better in people's minds as a platform for creatives right neither of those things are really line items well I guess the if you do some math you can do like the the services bundle stuff but

like in terms of brand equity that's not a line item you know that's more of a long-term play but I think it still makes sense yeah for my view I actually you know I'm kind of aligned with what you're thinking Steven end quote and you know coincidentally I actually came up with the same number that you did but but yeah I think that the it really this really depends on how Apple views the service more strategically right so it's not gonna make for them a ton of money but you know but even now you can tell that Apple thinks of this is very important just given the amount of you know app store space that they've allocated to arcade and how they've marketed it internally and externally and so you can tell that at least currently they they're putting a lot into Apple arcade and these they feel that it's strategically important but yeah from uh from a financial perspective you know just just kind of doing back in the envelope math and getting to actually this same exact same number that you came up with so so in

January of this year Apple CFO Luca Maestri revealed that you know Apple has an installed base of 900 million iPhones he didn't clarify exactly what that actually meant more specifically and but then he also added that there were 1.4 billion active iOS devices at the end of 2019 now okay I think the 1.4 billion is the actual addressable Apple Orakei market but let's just take that nine hopefully that's probably duplicative to some extent right I know that yeah I would use the 900 but that I lose iPads right yeah but you can you can I think Apple arcade is supported on iOS TV OS I guess so so TV OS is also interesting like there aren't that many reasons to buy an Apple TV now and like having access to Apple arcade could actually be one of them conceivably right come on yeah let's just let's just take the nine hundred million number and just you know one

percent penetration so that's 9 million times five dollars a month you did the same math Steven we actually came up with the exact same number so you know a reasonable assumption would be five hundred and forty million in annual revenue which is not bad I mean for Apple it's kind of bad but it's not super bad but then let's also say that the earmark 30% of that for developer rough share so three hundred and seventy eight million for them and so you know I don't know it's small relative to Apple but you know it's the outlay is also small the outlay is trivial for them they don't care you know they can do whatever the he wants right while they're waiting for like augmented reality and self-driving cars and all these other markets to pay off the mandate is grow services right their services services services is a service right hey I assume they're gonna have to keep like paying out developers to continue to make content for them so like if they can do it they don't care again so that this goes back to it's

like financially does not make a whole lot of sense so it really comes down to how does Apple view this service strategically right yeah and so that's I I think that's that's the main main issue and I know and again I I didn't want to pick a number higher than 1% just because like all the things that we talked about it's not this is not a mainstream service and it is not and for me you know and I guess you know I argue with Eric about this but I do think that if they would have done a different approach like kids education or whatever I think they could actually double triple that that audience but Eric what do you think you're killing me dude absolutely I am throwing up in my mouth right now so frustrated by this whole discussion let us have it this is okay first of all I agree Apple has the deepest pockets possible they could spend and lose money as much as they want but Wall Street is expecting five billion dollars of revenue from this in

a few years real if they're sitting at five forty and by that time it's probably 300 I mean game over dude like Apple will just look like idiots right in terms of from The Wall Street perspective now they are gonna I mean in my opinion they have to start tapering down expectations on this thing because there's just no way in God's green earth that that is gonna happen all right so yeah my first thing about your predictions first when you I love hypo high huh back-of-the-envelope high level predictions I do it all the time but one of the things that you're not really incorporating is churn right so churn could be as much as thirty to forty percent a month on this thing right now maybe less because of their diabolical renewal strategy I think it's less yeah but but ultimately you're gonna get there right as people get smart and realize they're getting charged five bucks for something they're not using right yeah how do you a at some point right and then ultimately a percentage of the overall install base is not really solid modeling to some degree

because you have to really account for demographic and regional break out of the install base and I didn't have a chance to actually look into this too closely but I've done it before in the past but I would imagine like in North America and Europe and maybe Latta am like you have a billion handsets you know 500 600 million or maybe maybe iPhones and then you take you know iPhones that actually can run this stuff maybe you're at like 400 million so maybe that's like your your top line in terms of your Dressel market and so that's where I would start but you know at the end of the day is gonna a play Apple is gonna support this if they want to support it you know they have unlimited budget could it get to break-even possibly you know but at five bucks a month it's gonna be rough right at ten dollars a month you know that's that's a little bit easier to scale right but I honestly think and I said this in the last podcast before I don't to be too pedantic about this but like but I am going to be anyway but the the really big impact I think this will

have longer term is the developers they're trying to support right I think ultimately well um I Apple will single-handedly destroy the value perception of indie content right so the more developers that create experiences for the service the more left more loss of value from the consumer perspective right so if the consumer perceives that a hundred games and a high production value like strong really great indie games are worth five dollars it's impossible to overcome that perception from the consumer over the long term right I tell you yatta in this presentation which I've said before said it to investors you know why aren't you doing there the question was why aren't you doing free-to-play content and then he basically said free-to-play games devalue content and it creates this race to zero right and I think Apple and Google well my could get us to the finish line on this race if if this continues in this way because it just scares me you

know that that all these great game developers and these people that you love are just their content is worth what Apple is saying you know cents 20 cents 30 cents right I don't think that's a good thing for your your favorite indie developers yeah so so I think that's a reasonable point and the question there the real key question is whether that is just the case on Apple's platform or whether it spreads to like Steam and ps4 and switch and the other platforms where these indie games are still you know very viable and I suspect that it'll the impact will be limited to Apple's platform where premium games were already dying they were already on their way out and to a certain extent I think Apple arcade is a response to that right it's not really a cause like it will be both cause and effect in that now that it exists it will hasten the

demise of premium games outside of Apple arcade on Apple's platform I don't think there's any question about that right I don't know if it's gonna kill off indie games outside of Apple's plan I kind of doubt it actually you know I think Steam epic you know all the other platforms like they're they're actually pretty invested in in getting indie games on those platforms still so alright so in Eric what do you think so in terms of the the Wall Street pressure do you think that if if they're showing like a break-even business that this thing that do you think there's enough pressure for that for them to just like even if Apple internally stirs thinks that this is a strategically important sort of business initiative you think that they're gonna have enough pressure to just force them to like not do this you know that's a tough one I don't cover Apple and I'm not really that as close to it but I honestly think between

Apple music was a resounding success right but they had this install base of and and an advantage on the platform that is you know unrepeatable to some degree right with any other service so Spotify is actually suing them about this right exactly and they have a they have a legitimate case right as we're competing against them in an unfair way but but they have no such advantage on Apple TV they have no such advantage they do have an advantage on Apple arcade excuse me but so at the end of the day like it's part of their overall services strategy and so I think their services strategy is pretty much flawed because I think Apple TV is ridiculous and and and I don't think arcades gonna really do much so if they stopped if they stopped hitting their services number you know there's gonna be a reckoning right because that's what

their expectation is and valuations of the company are being based upon multiples on these type of these type of revenues so yeah this could be a challenge for them but I don't I don't know what they will do I I actually I'm more on your camp in the sense that I think they'll continue to support this and spend whatever it takes but there's gonna be a limit to that you know maybe it's five years from now I don't know I think the other thing that may help them a lot is if they ship from from India's to more hits driven okay already talked about it but like somebody's got to be able to talk to those guys about like you know all the all the you know like all the longtail back catalogue stuff is not that's not where like the the world that we live in right now people play two or three games or or maybe just one game and that's what takes up all of their time yeah I mean I've put seven hundred hours into Civ six so yeah right like yeah so if they I think the one thing that can really move the needle for them in a big

way is is again shifting away from India is to like really focusing on five to ten key titles and just you know instead of investing a few hundred thousand or a few million dollars invest ten or ten million million or 50 million or 100 million on really key titles yeah exclusives I'm going back to my Nintendo example right it you know both of them are failing so miserably at this it's like two drunks holding each other up right you're like they partner up they do a subscription of their services and then Nintendo looks like a hero Apple looks like a hero and they may be able to drive some revenue on that but like I there was if there was a Nintendo deal on Apple arcade I mean like the the conversion would be like you know 10 per second version on Mario was what 2 percent right it was initially 10% on signal that's why absolute lie that's not true that was reported you could download the data dude there's no way it was 10 percent but whatever anyway nonetheless it

generated no revenue I mean II on a relative basis it will be really interesting to see how whoever is rut behind Apple arcade how their strategy evolves as the data comes in I assume that they have analysts looking at the data and they're gonna figure some of this stuff out right what's it look go ahead sorry yeah so so they could pivot to education right and they might do it pretty quickly they could pivot to much bigger games and you know we could see that probably in a year or two because those games take longer to develop than what we're currently seeing but they gotta be looking at this stuff on the back end they got AB analysts and right I I think everyone got Auto have to look at the data in a month or two from them right yeah no like it's gonna take at least six months this you know filter out sort of the golden cohort stuff and all that crap but yeah you know what's also diabolical to me is that you can't track or as far as I can see it's you're unable to track how many downloads of

the games are actually in arcade so I tried to look up oceanhorn - yeah and it's not even in the store right I don't think that's not I mean I think that's intentional right they don't want to know people to know how big how many people are downloading these games no and you might recall that Netflix is just now starting to discuss how many views is shows actually get and their metrics are different than industry standard and they're still just like barely trickling out that data and its really frustrating everybody in Hollywood right and it's like you know they play their cards really close to the vest because they don't want people who know all right like it's like if people if people knew it might affect their ability to raise money right and I think what you have to say about the street looking at Apple's services strategy it's like they don't want the street to know right it's like I think analysts will probably start asking those questions and Apple will just be like here's a crumb of information here a khromov information there just give them you know a little interesting to

see what they say in the earnings call about this because of course the renewal just came up right from day one few days ago I just got my notification from Apple that I was charged five dollars and I think that I'm feeling really bad about that terrible I feel like an absolute right but I fell for my own anyway all right guys well I think unless there are any final comments like I think that's just about it now this is a real pleasure can i plug my podcast yeah awesome all right so yeah as alluded to earlier I do have a doctorate in international relations from UCLA and I haven't used it for years to actually you know do academic work but I did start a podcast with a buddy of mine from graduate school we rant about I are on a weekly basis this past week we talked about the Chilean it's a disaster going on with the protests we've done climate change we've

done the situation in Syria it's called the elucidate earth decoding global news so check it out on wherever you get your podcasts basically we're there how long have you had your podcasts receive this was week 11 so we're pretty new and you know you you call yourself a wannabe youtuber I've heard you from that say that many times we're wannabe podcasters we're mostly just doing it for fun but you ate for podcast is very interesting trying to crack that code unit economics are tough I'll say that could you uh spell your podcast elucidate urse e lu c idat ors I didn't get a doctorate in philosophy so I can't didn't get a doctor in spelling either huh no doubt decoding global news you can also search for that and it'll come up thank you all right guys thanks a lot for your time and we are out awesome

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