As Pokémon Go climbed up the app charts as it became an international sensation, some analysts suggested that Apple might be making more money off of it than Nintendo.
Analysts at Needham on Wednesday did the math and have come up with a outrageous claim: Pokémon Go could add $3 billion to Apple’s revenue over the next one to two years.
In an analyst note distributed to clients, analyst Laura Martin walks through the math:
- Using Sensor Tower’s July 11 estimate of $1.6 million of in-app purchases per day in the United States, and an estimate of 10 million downloads on iPhones – source unknown – Needham comes up with a spending rate of $0.16 per person per day. (On July 11, Sensor Tower told me there were only 2 million iOS downloads in the United States, and now cites 30 million downloads across both iOS and Android.)Then, Needham assumes that Pokémon Go will achieve “20% penetration” in developed markets “at maturity.” But currently, Pokémon Go is only played by 6% of the U.S. population – and it’s been a phenomenon for a week.Assuming that Apple makes $0.05 per player per day – the 30% cut of Pokémon Go’s revenue it takes as owner of the App Store – Needham finds the “upside case” for Apple to be $3 billion over the next 12-24 months.
While Needham’s estimate is rough and does provide a ballpark figure, it’s likely way overstated.
Here’s a reality check: Apple announced in January that the App Store pulled in “over” $20 billion in total bookings. After Apple takes its 30% cut, that would be around $6 billion in revenue.
So if Needham’s estimate is correct, Pokémon Go could account for about 25% to 50% of App Store revenue, depending on App Store growth. That’s unlikely.
There’s also the reality that as Pokémon Go expands to more markets it will likely be played more on Android than iPhones – and that other countries might not spend as much on in-app purchases as early adopting Americans.
Plus, the number of total Pokémon Go players could drop as the fad dies down.
But Needham’s main point is well taken: that Apple “is THE global distribution platform for mobile content winners with the wealthiest consumers” – not just for Pokémon Go.
It’s undeniable that Pokémon Go is driving quite a bit of revenue, and that Apple makes money off of it without having to do anything, just by providing the platform.
Apple’s ability to generate revenue from its base of installed iPhones has been a talking point for Apple CEO Tim Cook to investors over the past year. The fact that Apple is profiting so handsomely from the Pokémon craze – even if it isn’t making $3 billion in a year – indicates it’s a winning strategy.