Nearly two years have passed since Netflix announced its entry into the gaming industry. Despite the streaming giant expanding its game library from 24 to 77 titles in the past year, subscriber interest has been relatively muted.
Netflix views this as part of its strategy. “This trajectory isn’t unlike what we’ve observed with previous expansions,” Co-CEO Greg Peters remarked during the company’s prerecorded earnings call on Wednesday.
“When we’ve launched new regions or genres, like unscripted content, we had to follow a gradual progression—crawl, walk, run. We see significant potential to develop a long-term value in entertainment.”
Netflix’s gaming venture is part of a broader strategy to diversify revenue streams amid a potentially saturated subscriber market. Other ventures include sports and retail, which are still in the early stages of development.
“The more potential revenue streams Netflix explores, the more options it has to highlight during future earnings calls, especially when challenges like password sharing impact subscriber growth,” commented Ross Benes, an analyst at Insider Intelligence.
Netflix announced its commitment to gaming in 2021 by releasing titles as standalone apps for mobile devices. The company has positioned gaming as a way to keep subscribers engaged between seasons of popular shows, such as “Stranger Things,” which has been adapted into two games.
Since then, Netflix has recruited several prominent figures from the gaming industry. Mike Verdu, formerly of Electronic Arts, joined Netflix as vice president of game development in 2021.
In February, Joseph Staten, the former creative chief for Microsoft’s “Halo Infinite,” was announced as Netflix’s “Creative Director for a brand-new AAA multiplatform game and original IP.”
However, engaging existing subscribers with mobile games has proven challenging. According to data from video analytics firm Conviva, over 75% of streaming service subscriptions are used on television screens, creating difficulties for Netflix in promoting its mobile games to subscribers who predominantly use the platform on TVs.
As of September 2023, Netflix’s games have been downloaded 70.5 million times worldwide, with an average of 2.2 million users playing one or more of the games daily.
Despite the addition of new titles almost every month, the average daily users peaked at 2.7 million in January 2023 but fell below 2 million between March and July, hitting a low of 1.45 million in March.
These figures suggest that less than 1% of Netflix’s 247.15 million subscribers engage with its games daily, even as the game library has expanded significantly over the past year.
In contrast, other mobile gaming publishers significantly outperform Netflix in downloads.
Since Netflix launched its first game, Gardenscapes publisher Playrix has accumulated 531 million downloads, Candy Crush maker King has 438 million downloads, and Clash of Clans owner Supercell has 388 million downloads.
To address the lack of interest in its mobile games, Netflix is testing new games that can be played on any device, as noted by Netflix’s vice president of games, Mike Verdu, in an August update.
The beta version, available to select users in Canada and the U.K., includes titles like “Oxenfree” from Night School Studio, a Netflix game studio, and “Molehew’s Mining Adventure,” a gem-mining arcade game
Games played on TVs 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 previously mentioned that gaming is following a familiar trajectory, with new content categories evolving over several years, but he did not provide specific data points.
Gaming developments were notably absent from Netflix’s second-quarter earnings call earlier this year, leading to speculation that the company might be considering scaling back its efforts.
However, the Wall Street Journal reported last week that Netflix plans to adapt more of its high-profile series, such as “Wednesday,” “Black Mirror,” and “Squid Game,” into mobile games. The company is also exploring a licensing deal to release a version of “Grand Theft Auto,” according to the Journal.
During Netflix’s third-quarter earnings call, Peters briefly addressed gaming, noting that current game engagement contributes to core business metrics in a way that complements movies and series.
Netflix also faces technological challenges in its gaming endeavors. Sunny Dhillon, founder of VC firm Kyber Knight, expressed skepticism about the viability of playing mobile games on larger screens, citing potential issues with bandwidth and server limitations that could affect gaming performance.
Despite these challenges, Netflix is not aiming to replace gaming consoles, according to gaming executive Verdu. “It’s a completely different business model. The goal is to make gaming a natural and accessible experience wherever you are,” Verdu stated.
