Netflix’s progression is a remarkable feat; it moved from being a small start-up that mailed rented DVDs, to becoming the largest streaming service in the world. For a while, Netflix were the innovators, but that's slowing.
There are now plenty of streaming alternatives, which means it's vital that Netflix differentiates itself from the competition. That’s part of the reason Netflix has announced it will add gaming to its platform.
In this article, we’ll look at Netflix’s video game plans and what it means for you. We’ll also examine whether the company’s new move will keep existing subscribers and attract new ones.
Why Is Netflix Adding Games Now?
There have been several hints at Netflix’s foray into gaming. The pandemic-fueled subscriber boom is wearing off, as more people are returning to normal activities and weaning off their binge-watching habits.
In the second quarter of 2021, total Netflix subscribers in the US and Canada plunged by 400,000 (as reported by MSN), indicating that the industry may be nearing saturation.
Netflix has previously revealed that its biggest competitor for on-screen time isn’t other streaming services, but games, especially immersive ones like Fortnite. The company thinks the time spent gaming, especially by young adults, is time spent not streaming a movie and can be counted as lost revenue.
In fact, Netflix founder and co-chief executive officer Reed Hastings once said that even sleep should be considered competition for Netflix. The company wants as much of their subscribers’ time as it can get, so offering this gaming service instead of competing with it seems like a prudent move.
And while Netflix has a subscriber base of over 200 million, the competition is getting fierce.
Netflix is looking to not only keep their subscriber base buoyant, but also to add new subscribers to the count. Since you can stream Netflix on several gaming consoles, adding a gaming service is a reasonable next step.
This won’t be the company’s first foray into the gaming industry. It did release a game based on Stranger Things and made TV shows with interactive features that allow viewers to form their own outcomes.
The gaming market is a gigantic industry in its own right, valued at a whopping $173 billion as of 2020 (as per Mordor Intelligence), with established giants like Sony, Nintendo, and Microsoft. Netflix wants a bite of that pie, but it'll have to fight for it.
If Netflix succeeds, games would be a new form of revenue generation and a great way to entice a subscriber base of avid gamers who’d only use Netflix for games.
What Are Netflix’s Gaming Plans?
Previously, we theorized how Netflix would enter the video game market. It was unclear what format the games will take, and what the experience would be like. Would the company walk in the footsteps of other industry giants like Apple and Google and create a gaming storefront? Apple Arcade and Google Stadia, which are both companies’ attempts at providing gaming software, failed. So, perhaps it would be unwise for Netflix to tread that path.
However, Netflix chief operating officer and chief product officer Greg Peters shared some more insights into the company’s plans during his company’s 2021 second-quarter earnings conference call.
While Peters did not exactly divulge the approach the company will take, he admitted that the company will “learn and grow, and refocus our investment based on what we see working” with games. He said that the company hopes to entice users with the “intentionality” that gaming provides, since users can basically customize their experience by choosing which characters they want to spend time with in various parts of a gaming world.
Peters also noted that Netflix will use user-driven decision-making to make subsequent decisions. It will serve as a guide for Netflix, not only in terms of making better games, but also in terms of creative decisions. If a Netflix-owned series has a character who is heavily featured in gaming, for example, that character could easily be featured more prominently in an upcoming season of the show.
“Perhaps someday we'll see a game that inspires a film or a series,” Peters speculated. And indeed, that would be an incredible interplay between films and games.
What We Think Gaming Means for Netflix
We think there are two possible ways that Netflix could go with the game integration. The company could either make in-house game titles, which would fit into Netflix’s reputation for offering quality original content.
If Netflix decides to go with the option of making in-house games by converting popular titles, it will face significant technological challenges. Publishing games relies entirely on the audience’s acceptance of and loyalty to existing content. It’s too risky. Disney tried it with its Infinity games attempt, and that didn’t work.
Factor in the added difficulty of setting up a talented gaming studio with stiff competition from established gaming giants, and the publishing plan is rendered non-viable.
The second option is something that Netflix is familiar with: licensing. While the company could simply purchase licenses to own competing games, cost is a big hurdle. The games that compete with Netflix for subscribers’ on-screen time will be costly to license. Some may even be unavailable for licensing.
We also have to consider the potential rift that Netflix’s new project will create with Apple’s App Store. Apple prohibits external apps from offering purchasable games to iOS users, if it circumvents the Apple payment system, so Netflix would need to tread lightly. And losing iPhone users will be a serious dent in Netflix’s subscriber base.
Will Games Keep Netflix Subscribers Happy?
Netflix has achieved such remarkable growth by challenging established players with a genuinely innovative business model. The company has delivered quality service at its previous engagements; from its DVD rental service to streaming.
If that excellence carries to its gaming service, it will deepen engagement and enhance the whole entertainment package it provides. Imagine watching a show, then continuing your journey in the video game world; this could be a remarkable extension of Netflix’s entertainment ecosystem.
One thing is certain: Netflix has a lot of work ahead if it wants to become a major gaming contender, and we just have to wait and see how it'll navigate the hurdles in its path. Will the gaming integration help stop the subscriber decline? We'll see.