Apple Inc. (NASDAQ:AAPL) helped to upend the mobile gaming industry with the App Store and the iPhone, and now makes gaming capability a key part of every new iPhone unveiling. So when PC gaming giant Valve announced its Steam Link iOS app, gamers celebrated the ability to stream high-performance PC titles from their computer to their iPhone. But on Wednesday, Apple pulled the plug and rejected the Steam Link app. The question is, why?
Ultimately, it all comes down to the Services revenue that is increasingly important to the company and to Apple’s stock.
Valve Releases Steam Link iOS App and Gamers Are Happy
On Monday, Valve’s free Steam Link app for iOS was approved for the App Store by Apple. It allows PC gamers to load up any game in their Steam library on a computer that’s on their home network, then stream that game to be played on an iPhone, iPad or even an Apple TV.
They can use MFi-certified Bluetooth controllers to improve the gaming experience on their iOS devices, since most of those PC games weren’t designed with touch controls in mind.
The move was widely applauded by gamers, since it freed them from the PC. With an iPhone in hand, they could now play Steam games anywhere in the house. They could also stream to an Apple TV and enjoy the action on a big screen TV instead of their computer monitor. Technically, the app was impressive, with reports of seamless 60 fps performance.
But on Wednesday, after Valve announced the app’s release, Apple ended the party.
Apple Pulls Steam Link Approval
On Thursday morning, Apple revoked approval for the Steam Link iOS app. Valve posted the news on Twitter:
“On Monday, May 7th, Apple approved the Steam Link app for release. On Wednesday, May 9th, Valve released news of the app. The following morning, Apple revoked its approval citing business conflicts with app guidelines that had allegedly not been realized by the original review team. Valve appealed, explaining the Steam Link app simply functions as a LAN-based remote desktop similar to numerous desktop applications already available on the App Store. Ultimately, the appeal was denied, leaving the Steam Link app for iOS blocked from release.”
Why Did Apple Block the Steam Link iOS App?
Given the importance of gaming on the iPhone, why would Apple yank an app that so many gamers have been hoping for? After all, if players can stream full-blown PC games to their iOS device, that may convince them to buy a new iPhone — one with a big display like the iPhone X. Or an Apple TV to take advantage of the really big screen options. That sounds good for AAPL stock.
However, the Steam Link App iOS app is treading on some very sacred ground for Apple. The app itself is free, so AAPL gets no revenue from its distribution. And it’s possible for users to buy additional Steam games to be downloaded to the host PC through that app — a loophole that bypasses Apple’s 30% cut of in-app purchases.
The bigger picture is that Apple is likely very worried about the implication of what amounts to a competing gaming platform on the iPhone that could make owners less likely to buy iOS games. In a review of the Steam Link iOS app, Touch Arcade said:
“I’m still dumbfounded by Apple apparently allowing this on their platform, as I could see a very real situation where many people just straight up stop buying things from the App Store and exclusively purchase Steam games through Valve instead.”
With iPhone sales losing momentum, Apple’s Services revenue is an increasingly important factor in AAPL stock growth. A big chunk of that revenue comes from the App Store — the $26.5 billion Apple says it paid to developers in 2017 means the company collected nearly $11.5 billion.
An estimated 49% of that revenue comes from games. Do the math and you can see why Apple would be reluctant to let the Steam Link iOS app loose on the App Store.
But Android smartphone owners can still get it on Alphabet Inc’s (NASDAQ:GOOGL) Google Play…
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
