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As Netflix Makes Its Gaming Play, Can It Avoid Alienating Users?

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Netflix, which can trace its roots back to a DVD-by-mail rental business model, has mostly blazed its own trail through what was – and in some ways still is – the undiscovered territory that is the streaming video market. Competitors have typically followed the lead of Netflix, an undeniable colossus of a company that reigns as the undisputed King of the Streamers.

Undeniable. Undisputed. But not necessarily unassailable. It’s an important distinction that should be heeded by Netflix as the organization ventures back out into the bush – the new frontier of streamer gaming. The company has traditionally embraced open debate about strategy within its walls, which should help it overcome corporate stodginess and failure to innovate. But that doesn’t insulate it from hubris. Netflix has made its share of grand pronouncements and hard-line decisions that it later – sometimes perhaps later than was prudent – sheepishly reversed.

Sometimes that’s the cost of doing business. But the stakes of this relatively new endeavor – gaming on streaming video platforms – are arguably as high as any the industry has experienced. A variety of possible monetization strategies for Netflix’s gaming division have already been floated, and may be in play – including a combination of several. But the company must step lively and remain flexible, avoiding alienation of both existing and potential users with a quick cash grab, which could prevent the wider adoption and long-term growth of its gaming platform. The considerations are almost innumerable.

Netflix Games’ Cautious Start

Netflix launched its gaming division in 2021, initially dipping a toe in the space. But the company has reportedly been ramping up plans for its games, having spent around $1 billion on studio and infrastructure investments, according to one analyst estimate. What began with relatively basic Candy Crush-style offerings (more than 80 games and counting) that are restricted to mobile devices is quickly evolving into more sophisticated fare, including a handful of Netflix-exclusive Grand Theft Auto titles and in-development titles that can compete with traditional console games.

Just as intriguing is the cross-promotional potential Netflix games bring to the table. Already, Netflix has created games around its popular Stranger Things, Money Heist and Too Hot to Handle series. The idea: encourage deeper user engagement during the peak of a series run, while holding the attention of subscribers and hopefully attracting new fans during the moments in between. More programming-related games can almost certainly be expected, and perhaps even monetization strategies that more directly leverage streaming video properties against their corresponding game titles, and vice versa.

But would Netflix invest so heavily in an enterprise it expected to be codependent to its streaming business? Not likely. “Netflix doesn’t make a lot of big bets,” Mike Verdu, Netflix’s head of gaming, told Axios in December. “The company’s been patient around those bets and put the work in to get it right. And this is one of those.”

So what might the next steps be for Netflix Games?

Shaping the Future of Netflix Games

Splashy studio investments, big-swing hiring efforts and nearly 100 new game titles in development are proof enough that Netflix is serious about its stated long-term commitment to the company’s games division. But making it profitable? That’s another story altogether.

To get it right, the streamer will have to answer some key questions about strategy in the near future. Should games pricing be subscription-based or a la carte? Would purchase models include tiered pricing? How about ads? In-app purchases? Product placement? Maybe all of the above?

There is no shortage of monetization options for Netflix Games. But the trick will be creating a sustainable model from which the company can profit and the division will grow – while at the same time building from scratch a customer base of gamers who may not be accustomed to (and a few of which may openly disdain) some of the monetization strategies being considered.

Whatever the details of the eventual action plan, Netflix should stick to its risk-averse instincts and avoid rushing into any decisions or regarding any of them as inviolable. The company is viewed as a monetization precedent-setter (see: advertising, password sharing restrictions, etc.), but it would be a mistake to play prophet in a space defined by its immaturity and uncertainty. Netflix would be wise to take it slow, test various strategies and remain willing to adapt as certain strategies take hold and others weed themselves out over time. With an understanding that too-aggressive monetization efforts could ground its burgeoning games division before it gets off the runway, Netflix has its best chance to build a successful long-term model that will (again) be the toast of the industry.

Aaron Jacobson is an expert media and games industry analyst working as the Chief Executive Officer at Zollpa Games, a New York-based indie games studio. Zollpa recently released an Open Beta for its new title, RoboSquad Revolution, a live-service arena shooter, in November 2023. 

[Editor's note: This is a contributed article from Zollpa Games. Streaming Media accepts vendor bylines based solely on their value to our readers.]

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