Apple Might Challenge Microsoft And Amazon With Gaming Service

In addition to a premium news subscription service and a video-streaming service, Apple (NASDAQ:AAPL) might also be working on a new gaming subscription service. The company has been trying to reduce its reliance on the all-important iPhone business, which has arguably peaked at this point. Instead, the tech titan has been building up its services segment, which is more profitable and generates consistent recurring revenue.

Apple isn't the only one

Creating the "Netflix of games"

Cheddar reports that Apple is working on a gaming service that would be a sort of "Netflix for games," allowing users to access a catalog of games for a subscription fee. The Mac maker reportedly discussed the notion with game developers late last year. Apple has even considered becoming a publisher, according to Cheddar. In the video game industry, a publisher typically takes on marketing and distribution while also often providing financial backing.

If Apple were to take on that role, it could try to finance exclusive titles only available on iOS as a means of differentiation. The vast majority of mobile games are cross-platform compatible, as developers look for the broadest distribution. Android is the largest mobile platform, but iOS generally offers much stronger monetization. It's also worth noting that games make up an overwhelming proportion of overall spending on the App Store, representing a massive 75% of consumer spending despite accounting for just 31% of downloads in 2017, according to App Annie.

Everybody's doing it

The news comes shortly after Microsoft (NASDAQ:MSFT) CEO Satya Nadella detailed a game service that the software giant is working on, except Microsoft wants to stream games to devices. The company had announced "Project xCloud" in October, and Microsoft would leverage its Azure cloud computing platform to deliver console-quality games to any device. "We describe it as, shorthand, 'Netflix for games,'" Nadella said earlier this month. Microsoft plans to start testing the service later this year.

Amazon (NASDAQ:AMZN) is similarly developing a game-streaming service, according to The Information, but it isn't expected to launch until 2020. The e-commerce giant has the largest cloud computing platform in the world (AWS), as well as one of the largest video game live-streaming platforms (Twitch). Amazon has active job listings for software engineers to work on cloud games. Alphabet subsidiary Google is also working on a cloud gaming service.

Sony (NYSE:SNE) was an early pioneer with PlayStation Now, a game-streaming service that launched in 2015. However, PlayStation Now's technical performance is lacking, and the service hasn't really moved the needle for Sony or the industry. Sony also offers PlayStation Plus, a subscription that also includes access to a catalog of free and discounted games.

Apple's rumored service doesn't seem to have a streaming component, so presumably users would still need to download any included titles. While that model would differ, it would still compete with other subscription-based game services. Whether Apple can make the economics work remains to be seen.

This article originally appeared in The Motley Fool.

Evan Niu, CFA is a Senior Technology Specialist at The Motley Fool. The Motley Fool has a disclosure policy.