Netflix Must Do This to Succeed in Video Games – The Motley Fool

Netflix Must Do This to Succeed in Video Games – The Motley Fool

Increasing competition in the streaming market has led several companies to diversify their offerings. Netflix (NFLX 1.25%) has done this by moving into games with its launch of Netflix Games in November 2021.

While Netflix is taking a step in the right direction by offering additional services, the company may have bitten off more than it can chew with its gaming service. Here’s what Netflix needs to succeed in the incredibly competitive world of gaming.

Name recognition is key

Netflix announced that it lost 200,000 subscribers in Q1 2022. The disappointment led to a complete shift in priorities for the company, resulting in content cancellations, a recently announced ad-supported tier, and a larger focus on games. The last has resulted in Netflix acquiring three game developers in less than a year: Boss Fight Entertainment, Night School, and Next Games. These studios’ output varies considerably, from popular mobile games to acclaimed indie titles to tie-ins with familiar franchises such as The Walking Dead.

Netflix’s head of external games, Leanne Loombe, said at the Tribeca Film Festival on June 13 that the company is “intentionally keeping things a little bit quiet [about Netflix Games] because we’re still learning and experimenting.” Loombe added that Netflix wants to “make sure that games are a really valuable part of our members’ subscription.” 

So far, Netflix offers 23 games. Titles such as Queen’s Gambit Chess and Stranger Things 1984 show Netflix is attempting to entice players with tie-ins to its popular content. However, this method makes the hefty assumption that fans of these series are also at least partially interested in playing games. 

Meanwhile, streaming rival Apple (AAPL 1.15%) has steadily increased its services business, introducing Apple Arcade in September 2019, and similarly allowing consumers to use the game service ad-free alongside other offerings such as Apple TV+.

Rather than focus its gaming content on its streaming originals like Netflix, Apple has gone straight to the source by offering subscribers mobile titles from popular gaming brands. Apple Arcade currently offers games from well-known franchises such as LEGO, PAC-MAN, Sonic, Cooking Mama, and more. Apple’s approach increases the odds that its players are already fans of games, increasing the odds of subscriber retention. The approach seems to be paying off: J.P Morgan has estimated that by 2025, Apple Arcade will see revenue increase 14% to $1.2 billion a year. 

The Stranger Things of games 

Gaming is a notoriously difficult and competitive industry to enter. If Netflix Games is going to help attract and retain subscribers, Netflix will need to offer hit games on the level of its mega-popular series Stranger Things, which racked up a record-breaking 286.79 million viewing hours in the first weekend of its latest season. 

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