Video games are Netflix's biggest competitor, its co-founder Reed Hastings has often said. So now he is preparing to do to the gaming industry, what he did to Hollywood all those years ago. Netflix, the video streaming company, wants to make its own games and the preparations have started.
Video games "are going to be an important part" of the Netflix experience, its COO Greg Peters had said in April this year. "We are trying to figure out what are all these different ways that we can increase those points of connection, we can deepen that fandom," he said.
The gaming content is expected to come from both Netflix, and independent studios. The company has reportedly hired Mike Verdu, a former Electronic Arts, and Facebook executive to lead the effort. Verdu will lead developers to bring games to Oculus virtual-reality headsets, Bloomberg reported.
The over-the-top content platform is facing stiff competition from the likes of Disney and Amazon Prime. And the recently announced WarnerMedia/Discovery deal does not help its cause.
In 2021, Netflix fell short of street projections for new customers in the first quarter. The streaming giant reported 3.98 million new subscribers from January through March, much lower than what its management and analysts had estimated.
Its competitors have a distinct advantage that Netflix does not—their revenue streams are diversified. For example, Disney has Disney+ and theme parks, and Marvel movies. As for Netflix, its revenue comes only from its subscriptions. While it has worked well for the company so far, it might not be the case anymore as the industry becomes crowded.
To battle this competition, for the first time, Netflix is moving beyond TV and movies to the video games industry.
The Gaming Industry
The gaming industry is the fastest growing industry in the entertainment category, with revenues larger than both film and music industries combined.
By 2023, global consumer spending on game software to rise to $200 billion from $175 billion in 2021. Moreover, a report by Deloitte, 26 percent of Gen Z would rather play video games than listen to music, browse, or watch movies.
Reportedly, Netflix gaming will be a reduced version of Apple Arcade, a subscription-based video game subscription service offered by Apple.
The games will appear like documentaries and stand-up specials — as a new programming genre. But the games will not include advertising, unlike its other entertainment options.
Netflix users can play the games in the app without paying any additional fee. However, the company refused to comment on whether users would be able to download the said games.
But analysts believe this could lower their customer attrition rate. While you can finish binging on a series in a day, you engage with video games for months, even for years.
Netflix and Chill
Netflix has, in past, released series based on video games, think The Witcher. It has also engaged in the mobile gaming industry via a licensing deal to launch "Stranger Things 3: The Game". Consumers have spent over $315,000 in Apple and Google's app stores since its launch in 2019, data from Sensor Tower Inc show.
The game, however, is not housed within Netflix's app or streamed online for that matter. It can be downloaded via app stores only.
For Netflix to stream games in its app on iPhones and iPad, it will have to take permission from Apple. But Apple has already once rejected Microsoft's and Facebook's efforts.
The gaming industry is stiff with competition as well though, unsurprisingly. And analysts think Netflix will have a hard time making its mark.
Other larger players have tried to step into the very enticing industry of video games and failed time and again. It can be a challenge, analysts say, to find the right content that can lend itself to become a videogame.
Google's Stadia, a cloud gaming platform launched in 2019 is yet to gain any traction.
Disney abandoned its game studios in 2016 and Viacom did it over a decade ago. While the ecosystem has changed since then, the challenges persist.
Netflix will step into the video gaming battleground against giants like Google Stadia, Microsoft Cloud, and Apple Arcade. And Amazon's Luna which is currently in beta testing mode.
In October 2020, Facebook added game streaming to its platform, expanding its content library. The games were free of cost to the players, in contrast to the paid, subscription cloud-gaming services of Google and Microsoft.
Co-Founder Reed Hastings had said earlier that Fortnite is bigger of competition to Netflix than HBO. And as Netflix is looking for its 'next big thing', video gaming might be what it needs.