Netflix will start producing games? What?

In today's Finshots we talk about the rather unusual admission from Netflix that they will soon foray into gaming

The Story

Netflix as a company took off when its founders decided to mail DVDs of blockbuster movies to customers. Then they evolved into a streaming service and you could watch your favourite movies and TV shows on the internet. Soon enough, they upped their game and started producing their own content. Think Netflix Originals. And now it seems they’re ready to break new ground by foraying into Video Games.

Yes, that’s right. Video games.

In fact, the company officially made its intentions clear in a recent letter to shareholders by stating that they were in the “early stages of further expanding into games.” They also added that this was part of their long-term strategy to learn more about how their subscribers valued games. So far, the company has already dabbled with special interactive shows, like Black Mirror Bandersnatch and You vs Wild where viewers got the opportunity to make choices and shape the way the story “played out”.

But fully fleshed games — That’s virgin territory. And if everything works out, you could possibly expect to see interactive video games based on your favorite TV shows.

But why even get into something like gaming in the first place? What’s this new fascination anyway?

Well, there is a short answer and a long one. The short answer is that Netflix is simply trying to maintain its lead in the highly competitive streaming business.

The long answer is that the market is now reaching a tipping point. It is a highly saturated industry with limited scope for expansion. There are so many streaming services right now competing for mind share and they’re all licensing/producing mind-numbing amounts of content. In fact, after Netflix made big gains in 2020, there was a visible slowdown in the total number of new subscribers they added this year. As one article notes — "The 1.54 million new subscribers is a far cry from the 10 million new subscribers the company added during the same time frame last year (Q2)." Now, it could be that last year was an aberration and following up that spectacular performance is simply impossible. But it could also be pointing to a dangerous trend. Maybe subscriber growth won’t be as robust anymore. Maybe all this competition is finally getting to Netflix.

So adding a new revenue driver in video games could actually help. And no, they’re not going to charge subscribers for it. But it will still be part of their entertainment catalog and will likely drive subscriptions. As the company put it — “Games will be included in members’ Netflix subscriptions at no additional cost similar to films and series.” And while they intend to start with mobile games at first, they could possibly do so much more if this thing snowballs into something more substantial.

But there’s more.

Netflix has confessed in the past that it isn’t just competing with HBO, Disney+ or YouTube, but is also competing with addictive video games like Fortnite and PUBG. Netflix CEO Reed Hastings went a step further and even stated sleep might be the company's greatest adversary.

As he put it— “You know, think about it, when you watch a show from Netflix and you get addicted to it, you stay up late at night. We’re competing with sleep, on the margin. And so, it’s a very large pool of time.”

So yeah, these people clearly value your attention and they will do everything in their power to keep you glued. Having said that, however, producing video games isn’t exactly child’s play. If the object is to create addictive mobile games, you have to be willing to experiment with a lot of ideas. Sure, the likes of PUBG and Fortnite achieved considerable success on this front, but it didn’t happen overnight. For every popular game you see out there, you can find a hundred other games that didn’t take off. And if you’re thinking about standalone AAA titles like GTA or Call of Duty, that’s simply a no-go for Netflix. It’s a lot more expensive to create games of this kind and your investment could go down the drain if people don’t take to it kindly.

So while Netflix does have room to experiment with gaming, it’s not exactly going to be a cheap affair. In fact, we’d even go as far as saying that this new gamble will probably be a lot more expensive than the gamble they took with original shows. Having said that, however, you could also argue that if Netflix stopped gambling, they'd never be so successful in the first place. So yeah, the company is foraying into gaming and hopefully, now you know why.

Anyway, that’s it from us today. We will see you on Saturday.

Until then…

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