Netflix is doubling down on its push into gaming.
The streamer is launching its own gaming studio out of Helsinki. Previously, Netflix’s gaming strategy has been acquisition-based; it bought Next Games, Boss Fight Studios and Night School Studio within the last year. Former Zynga and Electronic Arts executive Marko Lastikka will lead the Finnish studio. Developing a new studio is a bold move for a company whose previous gaming endeavors have been labeled a failure.
Having only been in the gaming industry for the last year, it’s still early days for Netflix’s future in the space. Still, convincing users to switch from passively watching shows to actively playing games has proven to be a difficult task. Complicating matters even further is the fact that games are exclusively accessed through the Netflix mobile app, which makes users who stream in other ways unlikely to access them.
In the past, Netflix has primarily drawn from its own shows to draw interest in its games. Hit shows like “The Queen’s Gambit” and “Stranger Things” have gotten the mobile game treatment, and Netflix has even explored the first-person shooter style. With their previous slate of titles, users access games through Netflix’s mobile app. The streaming company is also trying to give its current offering a more social feel as it introduces user-specific handles. Users can now create public usernames to identify themselves within games and on leaderboards.
Earlier this year, Netflix Vice President of Games Mike Verdu said the company is committed to its gaming endeavors even as it faces economic struggles. The goal: 50 games by the end of the year. But Netflix’s attempt to turn games into a lifeboat hasn’t worked out so far. As of August, less than 1% of its subscriber base actually engaged with the feature, drawing in about 1.7 million daily active users.
The limited engagement comes as Netflix’s subscriber count continues to drop, with the streamer losing 970,000 in the second quarter. As subscription costs rise, at least 40% of Netflix’s subscribers intend to ditch the platform. Planning to integrate ads by the end of the year, Netflix is competing with Disney Plus for both advertising dollars and mobile game users. Disney doesn’t offer its games through its streaming service, but the company has used its IP for a number of mobile games—including an apparent push for a slew of “Star Wars” games. For what it’s worth, Disney’s own attempt at an in-house gaming studio has so far failed as well.
Other entertainment companies are also exploring gaming as a new source of revenue. Netflix views TikTok as one of its major competitors, as the streamer battles the video-sharing app for people’s attention. For its part, TikTok’s gaming efforts have been rocky, too. It recently partnered with Gamelancer to launch minigames on the platform. But earlier this month, TikTok’s parent company ByteDance fired hundreds of employees in its video game department despite the fact that ByteDance’s mobile gaming strategy brought in $1 billion last year.
Writ large, the mobile gaming industry has seen a nearly 3% decline this year. Per one analyst, "It's unclear whether this softness in gaming revenue growth is because the software is underperforming or the hardware isn't there, but we're definitely seeing some hollowing out of demand." All of which is to say, Netflix’s road to gaming supremacy is a complicated one, to say the least. — Kristin Snyder
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