Pokémon Go A Boon To Apple

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Pokémon Go, an augmented reality mobile game, has swept the world. The joint venture between Nintendo and Niantic has been around for only two weeks, but is purportedly raking in $1.6 billion in revenue per day in the United States alone.

Nintendo and Niantic aren’t the only winners here, however. Smartphone makers also get a cut of the overflowing pie. Apple (AAPL), for example, stands to make $3 billion over the next 12 to 24 months from the app, according to investment banking firm Needham & Company.

Apple, like Google’s Android, charges a fee to host apps on its App Store. It also receives a portion of revenue received on apps and on in-app purchases. In total, the company keeps about 30% of the money users spend on in-app purchases for Pokémon Go (the app itself is free to download).

To give you an idea of just how insane this forecast is, Apple received $2 billion over the first two years after the launch of Candy Crush.

“We think Apple’s near-term cash flow from Pokémon Go is higher than Nintendo,” says Laura Martin, an analyst for Needham & Company.

Great timing for Apple

All things considered, this is a much-needed boost for Apple at a time when its hardware sales are decelerating. The company is spending a lot more on its software and services business to offset that decline, but this opens up a whole new avenue.

Considering the outrageous success of Pokémon Go, it’s safe to assume that other mobile game makers will jump on the augmented reality bandwagon. For example, thousands of people have already signed a petition asking for Warner Bros. to get the ball rolling on a Harry Potter version of the game where players can attend Hogwarts and compete in wizard duels with their friends.

While it’s uncertain whether that will happen, it is likely we’ll see more games like this, and Apple will be a major beneficiary of that trend. Why? Martin states that, “Apple is THE global distribution platform for mobile content winners (not just Pokémon Go), with the wealthiest consumers.”

Furthermore, “Because iOS owners are generally wealthier than Android owners, we estimate that over 80 percent of Pokemon Go’s in-app spending is on iOS devices,” she wrote.

Still other uphill battles  

Of course, Pokémon Go and other potential followers aren’t going to solve all of Apple’s problems. It still needs to find a way to keep the iPhone craze going, with the company expecting to report its first annual decline in iPhone sales ever this year. Nomura analyst Jeffrey Kvaal stated the latest numbers look uninspired, and he’s right.

The company also needs to find a way to make a smooth transition from the “first and best at everything” growth company to a cash cow that pops out solid, but less innovative products and services. Needless to say, this boost from Pokémon Go is a drop in the bucket where Apple is concerned. It helps, but there’s still a lot of work to be done.