It was nearly one year ago when Netflix announced that gaming would come to mobile devices. With a Netflix subscription, you are able to play from a library of games on your phone or tablet (you need to download a separate app for each game though).
This would represent Netflix’s first foray into gaming and is one of many technology companies entering the space. Netflix has slowly acquired mobile gaming studios, spending over 70 million on acquisitions. They are even building a completely new studio from scratch.
It makes sense for Netflix to enter gaming. Netflix’s main product is media, and video games are the highest-grossing form of media. So far, there are at least 29 mobile games available on IOS and Android through Netflix, with many being adaptations of Netflix series such as stranger things.
Netflix isn’t the only tech company that has entered gaming. Google launched Stadia in 2019, a streaming service that aimed to be a competitor to consoles and PC. Google however announced this week that it would be shutting down its streaming service early next year.
Amazon has also made a foray into gaming with their streaming service Luna. Unlike Google, however, Amazon has developed its own AAA titles through its internal studios and released them on Platforms outside of Luna.
So Why Is Netflix’s Business Model Flawed?
First, you need a Netflix subscription to access their library of games. Not that this is a bad thing in itself, but it is the only way to play Netflix’s games.
However, these games are only available on mobile devices. According to data, only 15% of Netflix subscribers actively watch media on their phones and tablets. The focus on mobile gaming may Out of all of Netflix’s 200 million+ subscribers, Netflix games are actively played by 1.7 million people.
This represents less than 1% of Netflix’s subscriber base. It’s either the result of consumers not being interested in Netflix’s gaming offerings or a complete marketing failure on Netflix’s behalf. The focus on mobile games (where you have to download a separate application for each game) may be what is keeping consumers
Netflix’s games are also free to play for Netflix subscribers, but with a dwindling subscriber count, it makes no sense to continue investing in games if they are not bringing in revenue or retaining subscribers.
Netflix also does not plan to include microtransactions or any other purchasable content in its games, which is also questionable since they will not be able to recoup on their multi-million dollar investment into games.
With the company’s stock down over 60% over the last year, people will have to wonder if Netflix is prioritizing the right things. Netflix’s foray into gaming is starting to look like Google Stadia, a disaster with a misguided and unrealistic business model.
If Netflix really wanted to enter gaming, it would release its first-party games not only through a Netflix subscription, but sell them outside of it as well. Amazon has done this with their 2021 title New World, which is available on PC (however not yet available on Luna).
Netflix will also have to be bold. Mobile games will not cut it, especially at a time when Microsoft, Sony, and others are actively acquiring AAA studios and publishers for billions of dollars.
Instead of acquiring mobile game studios, Netflix would be better off acquiring studios that develop high-quality games for PC and consoles. Netflix should aim to compete with large publishers like EA, Activision Blizzard, Take-Two interactive, etc.
Google stadia failed because Stadia tried to be different. Trying to be different or unique is a recipe for disaster in gaming. Netflix has the IP library and the cash to enable large acquisitions. There are many independent AAA studios and small publishers that have strong IPs that would be ripe for acquisition.
If Netflix does not change its gaming business model, then Netflix Games has died before it even had the spotlight.
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