I’m a daily Apple TV user, and that fact apparently puts me in the minority: even when the Apple TV’s price dropped to nearly iPod shuffle levels, it didn’t take off like Apple’s iPads or iPhones. From what I’ve gathered, many people think the little black box can’t do much. And it’s amazing to me that most people can’t describe what the Apple TV can do, even though it’s been available for years.
Adding an App Store to the Apple TV — a place to download games, new channels, and apps — has seemed for years like a no-brainer for everyone… except Apple. Blame the hardware, the software, or protracted negotiations with potential partners, but after years of waiting, it just hasn’t happened. Calling this a missed opportunity would be an understatement: video games alone generate tens of billions of dollars of revenue annually, and well over half of them are now sold digitally. Thankfully, 9to5Mac’s Mark Gurman reports, Apple will finally bring both iOS 9 and an App Store to the Apple TV this year.
The big question on my mind is how Apple plans to monetize the new Apple TV, particularly given its potential as a gaming console. Prior-generation Apple TVs failed to thrive at $99 (or even $69) price points, which is the same range where Amazon Fire TV, Roku, Ouya and others have struggled to match the market share of PlayStations, Wiis, and Xboxes. Moreover, Apple’s customers have shown little interest in paying ridiculous prices for iOS game controllers, so the hardware upside appears to be somewhat limited for Apple. There is, of course, a logical solution: Apple should accept the lessons it has learned about Apple TV and game accessory pricing, compensating for relatively low hardware profits by selling massive quantities of affordable software…
With over 1.5 million apps in the App Store, the vast majority of developers are struggling just to get attention, let alone make enough on games or apps to stay afloat. For years, the average selling price of an iOS app has hovered around $1 — $1.10 for an app, $0.60 for a game — which isn’t enough to entice top-tier developers to release their flagship games first on Apple’s devices. But even so, there are signs that major players aren’t willing to give up on the iOS platform. Apple has hundreds of millions of iOS users around the world, and it’s clear that low initial app prices can be offset with post-download ads, and/or in-app purchases ranging from consumables to subscriptions.
There’s still a huge amount of cash passing through the App Store, but as the Top Grossing lists show, it’s going heavily towards addictive, lightly social games with in-app purchases, subscription music and video services, and dating apps. Today, games selling for $5 or less dominate the App Store’s Paid Apps list, which is currently topped by Microsoft’s perenially popular and atypically $7 priced Minecraft: Pocket Edition. By contrast, other Microsoft apps such as Word, Excel, and PowerPoint are in the top 50 on App Store’s Free Apps list, but have some of their functionality locked behind Office 365 subscriptions.
Other savvy iOS developers have similarly been experimenting with low-cost paid and freemium models for their best-known products. Bandai Namco, one of the world’s largest console game developers, released two separate iOS Pac-Man games in the last month — the awesome PlayStation/Xbox title Pac-Man Championship Edition DX (above), and a new mobile-focused version called Pac-Man 256 (shown at the top of this article). For DX, Bandai opted for an entirely reasonable flat $5 asking price, down from $10 for the previously-released PlayStation and Xbox versions. The considerably simpler Pac-Man 256 is an endless-scrolling freemium game, letting you earn coins for power-ups by playing or watching ads, and offering an optional coin multiplier for $5.
Other developers have continued to defy conventional “$1 to $5” pricing wisdom. Duck Duck Moose, a well-respected developer of educational apps for kids, this week released its most ambitious and impressive title yet — a sandbox full of design, drawing, music, science, and geography tools called WonderBox (above) — for free, with no in-app purchases. On the other hand, major Japanese game developer Square Enix has released old console Final Fantasy games for $15 each, with its best-known sequel (Final Fantasy VII) officially hitting the App Store today for the same price. Console developers that haven’t entered the App Store yet are most likely holding off for one reason: they aren’t confident in the ability of their previously $50-$60 console games to sell at even $15 price points on iOS.
Apple needs to fix that, and if it does, everyone can win. The next-generation Apple TV hardware may not have the ability to launch at a much higher price point — at least, for a basic model with limited storage capacity — but if Apple pushes the device as a way to play console-quality games at $10 to $20 prices, it could make up for the low hardware price with substantial software revenues. Even with average app selling prices in the $1 range, Apple’s 30% cut of App Store sales equaled around $4.5 Billion of the $15 Billion spent on games and apps last year. If it could create a premium software tier for Apple TV games, it could sell those games at prices that both consumers and developers would find a lot more attractive than their current console options. At the same time, Apple’s own App Store revenues would jump.
That assumes, of course, that you’d be willing to pay more for true console-quality games on an Apple TV. So I’d like to ask you: What maximum price would you be willing to pay to get AAA-quality console games on the Apple TV? Vote in the poll here and let us know!
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