Netflix will enter the gaming market with caution, having learned from Amazon and Google’s mistakes. Can Netflix compete in the crowded gaming market?
NETFLIX IS SET TO ENTER A BOLD NEW TERRITORY.
The streaming giant announced plans to include video games alongside its regular offerings on July 15, a move that could result in a significant revenue boost for the company. However, big tech’s recent attempts to enter the gaming space have resulted in a slew of costly failures, such as Amazon Game Studios and Google Stadia.
However, according to George Jijiashvili, Principal Analyst at Media, the movie and TV streaming titan is unlikely to replicate the mistakes of its big-tech contemporaries.
“Netflix will enter gaming cautiously, having learned from the mistakes of Amazon and Google,” Jijiashvili tells Inverse.
According to Bloomberg, Netflix will not use its new video game streaming model to raise prices shortly. Instead, the new initiative could be used to cross-promote Netflix’s original programming while also encouraging members to spend more time on the platform.
Inverse spoke with Jijiashvili, Newzoo Senior Market Analyst Jordan Fragen, and Joost van Dreunen, the author of One Up and lecturer on the business of video games at New York University Stern School of Business, to get a better sense of what this could mean for the video game industry as a whole. They shared their thoughts on the types of games Netflix is likely to produce and how it might compare to more established competitors such as Microsoft and Sony.
26TH OF JULY, 2021 UPDATE: Following the publication of this report, Netflix confirmed that it will be developing smaller games for mobile devices at no additional cost for the time being. This is consistent with the predictions of analysts. According to The Verge, Netflix stated that “games, like films and series, will be included in members’ Netflix subscriptions at no additional cost.” The company also stated that it would “primarily focus on mobile device games.”
NETFLIX A NEW CHALLENGER
Is Netflix attempting to directly compete with Microsoft and Sony by adding a large library of games to its platform? According to the analysts we spoke with, it is unlikely. Jijiashvili believes Netflix’s games will complement the experience.
“With its gaming service, Netflix will not seek to compete directly with Xbox and PlayStation,” Jijiashvili says. “I believe the games will live within the Netflix app, with the primary goal of providing a complementary experience to increase engagement and [to] keep people on Netflix for a longer period of time.”
In this case, the term “complementary” most likely refers to a game on a much smaller scale than titles from big-budget franchises such as Call of Duty or Halo. You’re not going to play Netflix games instead of the next big Assassin’s Creed game. You’ll be able to play them alongside the blockbuster titles.
Van Dreunen concurs, arguing that Netflix’s initial ambitions in the space will most likely be more modest than those of Amazon or Google.
According to van Dreunen, “Microsoft Game Pass and xCloud are proof points that a sustainable market for subscription-based content services now exists in gaming.” “Netflix, on the other hand, currently lacks the experience and expertise to differentiate itself. I expect them to launch an add-on gaming service similar to Apple Arcade first, which will then be rolled into the standard subscription.”
Depending on how successful this venture is, Netflix may eventually begin working on larger-scale games similar to those found on consoles, but don’t expect that to happen right away. Xbox CEO Phil Spencer is unlikely to lose sleep over a threat to Game Pass anytime soon.
With a massive install base of 208 million worldwide users as of Q1 2021, Netflix benefits from being an instantly recognizable brand.
“While Microsoft has a first-mover advantage with Xbox Cloud Gaming and a strong library of games via Game Pass, Netflix’s strength is that they already have many more users logging into their platform every day,” Jordan Fragen of Newzoo tells Inverse.
Netflix will most likely focus on smaller projects tied to its existing IP, but a massive AAA project isn’t required to draw a crowd. This is because the crowd has already gathered.
Despite the poor track record of big tech companies dabbling in game development, experts agree Netflix’s future looks bright.
“In contrast to tech behemoths attempting to enter the gaming space, Netflix is primarily a media company with a strong and long-standing relationship with its subscribers — arguably, Netflix is in a much better position, and its gaming service should thus be better received,” Jijiashvili says.
NETFLIX KEEPS IT CASUAL
According to Fragen and Jijiashvili, if Netflix plays its cards correctly, it could attract an even larger audience with interactive experiences that appeal to fans of its original movies and TV shows like Stranger Things or Lupin.
“If Netflix goes the interactive experience route, [it] may generate widespread demand for a new type of content that may pique the interest of non-gaming Netflix users,” Fragen says.
Because not everyone is interested in complex games, what better way to attract a diverse audience than to entice customers with interactive experiences?
“I envision Netflix first experimenting with simple, family-friendly HTML5 multiplayer games and interactive experiences akin to Bandersnatch, using a TV remote or smartphone as a controller,” Jijiashvili says.
Another major issue for video game streaming is varying internet speeds, which Netflix is already familiar with thanks to its TV and movie businesses. It’s unlikely that Netflix will be able to stream complex games without noticeable lag, at least at first, so we’ll probably see smaller experiences instead. Streaming something like Black Mirror: Bandersnatch, a Netflix “choose your own adventure” experience that debuted in 2018 — is more viable than a shooter that requires pinpoint precision.
“It’s unlikely that Netflix’s interactive experience design will be reliant on fast-paced, precision-based, multiplayer titles that require a fast internet connection,” Fragen tells Inverse. “It would be surprising if Netflix chose to develop traditional games in-house, as it would be the most difficult path for them to take. It is extremely difficult and time-consuming to start a game studio from scratch.”
NETFLIX WILL HAVE A ROOM TO ADAPT
Netflix original series such as The Witcher, Castlevania, and the upcoming League of Legends are examples of cross-medium content that can introduce non-gamers to gaming IP. This is a tried and true strategy. Following the release of The Witcher Netflix series in December 2019, sales of Witcher 3: The Wild Hunt (a video game) increased by 554 percent year on year during the same month.
Sony is using cinematic adaptations to boost the popularity of the original game with its upcoming Uncharted film and The Last of Us and Twisted Metal shows. This will most likely result in increased video game sales while also capitalizing on a pre-existing audience for those movies and shows.
“Netflix’s IP has the potential to do well: imagining a board game based on Stranger Things and then following it up with an RPG-style title makes sense,” van Dreunen says. “However, rather than issuing first-party ports of existing IP, Netflix needs to think more creatively and take more risks to stand out.”