Netflix is Building An Internal Game Studio

Over the last few months, Netflix has been on a shopping spree, purchasing independent mobile developers left and right. Netflix wants to get into gaming, but for many, their focus on mobile games had some questioning Netflix’s plans.

Last year, Netflix added mobile games to their subscription service, allowing consumers to access these games on a phone or tablet, a move that signaled Netflix’s plans to enter gaming.

In a statement today, Netflix’s Amir Rahimi, VP of Games Studios announced the creation of an internal game studio made from scratch. The studio, located in Helsinki Finland will be helmed by Marko Lastikka who was a former executive at Zynga and EA.

Today, I’m excited to announce that we are establishing an internal games studio in Helsinki, Finland, with Marko Lastikka as the studio director. This is another step in our vision to build a world-class games studio that will bring a variety of delightful and deeply engaging original games — with no ads and no in-app purchases — to our hundreds of millions of members around the world. 

Why Helsinki? It is home to some of the best game talent in the world. This will be a games studio that we build from scratch, and our second games studio in Helsinki alongside Next Games, which became part of Netflix earlier this year. Along with Night School Studio and Boss Fight Entertainment, these four studios, each with different strengths and focus areas, will develop games that will suit the diverse tastes of our members.  

It’s still early days, and we have much more work to do to deliver a great games experience on Netflix. Creating a game can take years, so I’m proud to see how we’re steadily building the foundation of our games studios in our first year, and look forward to sharing what we produce in the coming years. 

It makes sense for Netflix to enter interactive entertainment. Video games have consistently been the largest and highest-grossing form of media, surpassing movies,  streaming, and music combined. 

It is uncertain if this new studio will produce mobile games as do the rest of their acquired studios. Netflix wants to create interactive content for Netflix, and it must do so carefully to avoid the mistakes of other big tech companies entering gaming. 

Google and Amazon are other tech giants that have made the plunge into developing games, and both have made big missteps. Google would eventually shut down its internal studios, and Amazon games have canceled more games than they have released.

Netflix’s games also do not have a high player base. According to CNBC and Techcrunch, less than 1% of Netflix’s subscribers play the games included in their subscriptions. This could possibly be explained by a lack of interest, or consumers not knowing that Netflix offers games.

We have seen that non-traditional services tend to fail to gain the attention of consumers. Services like Google Stadia and Amazon Luna have failed to enter mass consumption as consumers prefer gaming on traditional offerings like the Xbox, Playstation, Nintendo, and PC. 

For now, it seems unlikely that this studio will develop high-budget AAA titles. Currently, Netflix does not plan its future games to have microtransactions. Since its games are free to play for Netflix subscribers, it puts the business model into question.

Netflix stock is down almost 62% YTD, after quarter after quarter of missed earnings and a declining subscriber base. It is clear that gaming is not enough to retain subscribers, so it makes little sense to invest so heavily into it if it will not generate revenue.

It might be smarter for Netflix to sell its games on other platforms outside of a Netflix subscription, and possibly develop AAA titles for consoles and PC. 

Netflix is no stranger to creating original IPs. With the right creatives, they may be able to develop strong IP offerings that will attract subscribers. 

While we have many questions about Netflix’s gaming plans. Developing games take a long time and a lot can change during development. We should have more info from Netflix in the following years.