Netflix takes slow approach to video games

It’s been nearly two years since Netflix first announced its foray into gaming. Yet, as Netflix has more than tripled its game library from 24 to 77 games in the last year, subscribers have largely shrugged their shoulders.

This is all a part of the plan, though, according to Netflix.

“This trajectory is not dissimilar from what we’ve seen before,” Co-CEO Greg Peters said on the company’s prerecorded earnings call Wednesday. “When we’ve launched a new region — or when we launched new genres, like unscripted” we had to “crawl, walk, run, but we see a tremendous amount of opportunity to build a long-term center value of entertainment.”

Netflix’s push into gaming is part of a larger effort to plant seeds for future revenue streams to offset a potentially saturated subscriber environment. Others include sports and retail, each of which are in the early phases of development.

“The more potential revenue streams [Netflix] throws out there, the more things they can hang their hat on during an earnings call in the future when password sharing has run its course and they’re not adding new subscribers,” said Insider Intelligence analyst Ross Benes.

Netflix announced it was taking gaming seriously in 2021, rolling out titles as stand-alone apps for mobile phones. Netflix said that games are a strategy to keep subscribers engaged in between seasons of their favorite shows, such as “Stranger Things,” which has been adapted into two games.

Since 2021, the company has brought in several big names in the gaming space. Former Electronic Arts mobile gaming executive Mike Verdu joined Netflix as vice president of game development in 2021. Joseph Staten, who was the creative chief for Microsoft’s “Halo Infinite” game, announced in February that he was joining Netflix as “Creative Director for a brand-new AAA multiplatform game and original IP.”

Getting existing subscribers to download and play mobile games is a challenge, though, Benes noted. More than three-fourths of all streaming service subscriptions are utilized on a television screen, according to data released last year from video analytics firm Conviva. This presents an obstacle for Netflix in marketing its mobile game library to existing subscribers since customers don’t tend to use Netflix on their phones.

As of September 2023, Netflix’s games have been downloaded 70.5 million times, globally, according to data obtained from Apptopia. An estimated average of 2.2 million users played one or more of Netflix’s games per day, even as Netflix adds new games just about every month, according to Apptopia. Average daily users peaked at 2.7 million in January 2023, but dipped below 2 million between March and July, hitting a bottom of 1.45 million average daily users in March.

These numbers imply that less than 1% of Netflix’s 247.15 million subscribers play a game on a daily basis, even as the game library has tripled in its offerings in the last year.

Other mobile gaming publishers far outpace Netflix in downloads. Since the inception of Netflix’s first game offering, Gardenscapes publisher Playrix had 531 million downloads, Candy Crush maker King had 438 million downloads and Clash of Clans owner Supercell had 388 million downloads, according to Apptopia.

With interest lacking in its mobile games, though, Netflix has begun testing new games that can be played on any device, Netflix’s vice president of games, Mike Verdu, said in an August post. The beta rollout to limited users Canada and the U.K. included Oxenfree from Night School Studio, a Netflix game studio, and Molehew’s Mining Adventure, a gem-mining arcade game. Games played on a TV will require players to use a mobile phone as a controller, accessible through the Netflix app on Android and a separate controller-specific app on iOS.

Peters said earlier this year that gaming was “following a trajectory that we have seen before” with new content categories, “where we sort of build into this over a multiyear period,” but refrained from divulging specific data points.

Mention of any gaming developments was noticeably absent from the company’s second-quarter earnings conference call earlier this year, raising suspicions that Netflix may be gearing up to abandon its efforts.

But that was not the case. The Wall Street Journal reported last week, ahead of the Netflix’s third-quarter earnings report, that the company plans to adapt more of its big-name series, such as Wednesday, Black Mirror and Squid Game into mobile games. The streaming giant is also looking into releasing an iteration of Grand Theft Auto through a licensing deal, the Journal reported.

Then, gaming came up briefly in Netflix’s prerecorded third-quarter earnings conference call, where Peters said that games engagement currently “drives core business metrics in a way which is incremental to movies and series.”

Netflix’s attempt to woo gamers also faces technological hurdles.

“I don’t think that playing mobile games, but on a bigger screen, is something I would be bullish on,” said Sunny Dhillon, founder of gaming VC firm Kyber Knight.

“The bandwidth and servers that are being used are inherently handicapping the gamer,” Dhillon said. “I don’t think that we’re in a place where streaming multiplayer hardcore games can be played successfully simply because of the lags.”

But Netflix is not looking to be a console replacement, Netflix gaming executive Verdu previously told Tech Crunch.

“It’s a completely different business model. The hope is over time that it just becomes this very natural way to play games wherever you are,” Verdu said.