Netflix, the streaming giant, is reportedly planning to further diversify its business by venturing into the gaming industry in a bid to tap into new profit streams. According to The Wall Street Journal, Netflix executives have been discussing ways to generate revenue from games in recent months.
Insiders have revealed that some of the ideas being considered by Netflix management include in-game purchases, charging for more complex games under development, or offering ad-supported games to users who subscribe to cheaper ad-based plans. These measures, if implemented, would mark a significant shift in Netflix's gaming business strategy, which has previously emphasized that it wouldn't introduce in-game purchases or ads.
It's important to note that while Netflix often discusses corporate strategies publicly, it doesn't necessarily mean that decisions regarding the monetization of games will materialize.
Netflix ventured into the gaming business a few years ago, but its offerings have primarily been simple games derived from popular shows. These games mainly serve to attract fans and maintain show popularity and are available for free play. However, Netflix's gaming user base is still relatively small. Estimates from Apptopia suggest that less than 1% of Netflix's total users play its games daily. Furthermore, Sensor Tower's data shows that Netflix's games were downloaded 81.2 million times globally last year, a significant increase from 28.7 million times in 2022 but still far behind the hundreds of millions of downloads of major gaming companies.
Over the past few years, Netflix has acquired several small gaming studios and begun producing more games focused on its own shows and movies. Its most popular original game, "Too Hot to Handle: Love is A Game," was released in December 2022 and has been downloaded approximately 7 million times.
Analysts estimate that Netflix has spent around $1 billion acquiring gaming studios and establishing its business, compared to its annual spending of about $17 billion on shows and movies. However, Netflix is actively recruiting gaming executives, including one position responsible for overseeing the development of Netflix's first AAA title, which typically costs hundreds of millions of dollars to produce.
In April last year, Netflix Co-CEO Greg Peters expressed the company's desire to create a pure gaming experience for Netflix gamers. He mentioned that the Netflix gaming design team focuses solely on player enjoyment, without considering monetization through ads or in-game purchases.
Amidst rising living costs and intense competition in the streaming service industry, many companies are under pressure to reduce costs and improve their value proposition to survive in the market. While Netflix's operating condition is relatively good compared to competitors, it also faces immense pressure to boost profits. For instance, Netflix previously resisted cracking down on password sharing and introducing ad-based tiers due to concerns about consumer experience but later reversed its stance due to performance pressure.
Therefore, it wouldn't be surprising if Netflix's gaming strategy undergoes a transformation against the backdrop of intensifying streaming competition.
