Netflix Intensifies Dive Into Gaming Landscape
Netflix is making substantial moves in the video game industry. The streaming powerhouse is using the influence it has gained from recent studio acquisitions to develop a wide range of titles based on popular TV programs and films, along with a focus on higher-end games that are manufactured for seamless streaming on both PCs and TVs. This places Netflix in a unique position as a direct competitor with industry giants like Microsoft and Sony.
Jacqueline Corbelli, Founder, Chairman, CEO at BrightLine, and Vikrant Mathur, Co-Founder at Future Today, both weighed in about various aspects of Netflix’s new video game business. Regarding Netflix's strategic vision behind increasing its presence in the video game industry and how it aligns with the company's overall mission in the streaming space, Corbelli said, “Apart from programs and movies, gaming stands as the leading form of video content. In a landscape where preserving and expanding your subscriber base is crucial for sustained success, it's essential to assess how this type of video experience can reinforce your content strength. Netflix has been exploring this for years.”
Mathur said, “Gaming helps Netflix manage churn and improve revenue by appealing to a user base that would continue to subscribe to the service for gaming options that the service now provides. Continuing to keep the popular shows at the top of mind for users (even when there is nothing new to release) eventually boosts any licensing and merchandising revenue that may be attached to that IP. If done right, gaming could be quite complementary to Netflix's video and retail strategy.”
Netflix’s focus on higher-end games also puts it in tricky competition with established industry giants such as Sony and Microsoft.
“Netflix faces an immediate challenge in delivering compelling gaming experiences to television screens, making differentiation from traditional gaming console manufacturers will be a stiff challenge for the company,” Corbelli said.
Mathur agreed, and he broke down the hurdles that Netflix faces in this market and what it might do to make its entry into it work with its already existing infrastructure and customer base. “It will be hard for Netflix to compete with giants such as Sony and Microsoft,” he said. “The games these companies offer are heavy-duty and for the hardcore gamer. The vast majority of Netflix viewership happens on the TV screen through devices with relatively cheap hardware and low processing power. To create its own niche, Netflix should make casual games for regular viewers that they can play on TV using a basic remote control. The other option would be for Netflix to open its platform to third-party developers so that other developers could create games based on Netflix IP and launch across their distribution footprint.”
Netflix does have a good opportunity to leverage its partnerships with the studios it recently acquired. However, Mathur noted, “If the strategy for Netflix is to create games based on Netflix's original IP, studio acquisitions shouldn’t matter as long as Netflix continues to have the rights to create games off of those shows.”
Regarding other major streamers following Netflix’s move into the video game industry, both Corbelli and Mathur said that it is unlikely its competitors will make the jump anytime soon due to the many uncertainties involved. “The path forward, even through acquisition, remains highly complex and uncertain,” Corbelli said. Mathur also pointed out that, in general, it is difficult for legacy businesses to quickly and efficiently pivot into highly different markets.
Cloud gaming could prove to be complementary to Netflix’s other content. Even so, Corbelli said, “It's too early to predict the exact synergy between cloud gaming and Netflix's other content offerings. However, Netflix recognizes the value of gaming to its audience and has undertaken initiatives in the mobile space to comprehend it better. These efforts have led to a broader strategy, although the specific complementary aspects are still unfolding.”
Ultimately, whether or not Netflix is successful in its new gaming endeavor will depend on reorienting the perception that its users have of it as primarily being a source of streaming for TV and movies. “The challenge for Netflix is to get its subscribers to also think of the service as a gaming platform,” Mathur said. “Right now, only about 1% of its overall subscriber base plays the games that Netflix develops. Can Netflix change that perception and increase the adoption of its games beyond the paltry number it is right now? The gaming division needs its 'House Of Cards' moment.”
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