Please ensure Javascript is enabled for purposes of website accessibility

Apple Offers Discounted Year of Apple Arcade

By Evan Niu, CFA - Dec 17, 2019 at 6:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Apple Arcade joins Apple Music and Apple TV+ in offering longer subscription terms.

Discounts are a tried-and-true way to sell longer-term subscriptions and Apple (AAPL 2.45%) knows it. This week, the Mac maker rolled out a new annual subscription option for Apple Arcade, the company's Netflix-esque service that includes unlimited access to a massive and growing catalog of premium mobile games. Consumers can now sign up for a full year of the service for $50, which represents a 17% discount compared to the $60 that it would cost paying $5 per month over the course of a year.

It's the latest move that Apple is making to juice its services business.

An Apple Arcade game displayed on an iPhone

Image source: Apple.

Apple wants longer commitments

After being unveiled in March, Apple Arcade launched in September with around 100 titles, with more games being added to the library every month. Thus far, the service has garnered positive reviews, thanks in part to eschewing ads and the loathed in-app purchase model, combined with the aggressive price point of $5 per month. The annual subscription option brings the cost down to $4.17 per month, further strengthening the already strong value proposition.

In contrast, it took Apple nearly two years before it added an annual subscription for Apple Music, which initially launched in June 2015. That service's discount parallels Apple Arcade's, with a year of Apple Music costing $99 compared to the monthly option of $10 per month. The music-streaming service is fundamentally more complicated, as Apple must contend with record labels that own licensing rights. With Apple Arcade, the company is helping fund development and undoubtedly has greater control over the service's terms.

Apple TV+, the company's video-streaming service that launched last month, similarly includes an annual subscription at the same price point of $50 per year. But with the tech giant currently giving away a free year of Apple TV+ with hardware purchases, Apple has certainly already signed up millions of users for service for the next year. The company owns all of the underlying original content for Apple TV+, allowing it to set whatever terms it likes.

Apple is reportedly working on a services bundle, another popular discounting strategy among subscription businesses. The company could potentially choose to stack discounts, offering savings for a bundle in addition to longer terms.

Marching to 500 million

Apple has been pulling all of the growth levers it has at its disposal for paid subscriptions, a critical metric for its services segment. At the end of the third quarter, Apple had 450 million paid subscriptions across its platforms, with CFO Luca Maestri confirming that "we are well on our way to our goal of surpassing the 500 million mark during 2020."

While Apple Arcade carries some cannibalization risk, given the sheer popularity of the in-app purchase model in the context of mobile games, it seems that Apple would still rather grow paid subscriptions that provide a stable base of recurring revenue.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$141.66 (2.45%) $3.39
Netflix, Inc. Stock Quote
Netflix, Inc.
NFLX
$190.85 (5.03%) $9.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.