Netflix thinks video games matter greater than shopping for film studios

As Netflix’s streaming rivals like Prime Video and HBO Max’s WarnerMedia deal with consolidation and studio acquisitions, Netflix is as a substitute prioritizing its personal service and funding in video games over snapping up any obtainable studio IP. It’s a refreshing shift away from shopping for distressed film studios or long-forgotten catalogs. However will it work?

Netflix spelled out its streaming technique in its second quarter letter to its shareholders. Citing current mergers between WarnerMedia and Discovery and the final decade of acquisitions and mergers between main media properties — for instance, with Disney and Fox or Viacom and CBS — the corporate stated it doesn’t “imagine this consolidation has affected our development a lot, if in any respect.” (If I’m a streaming service proper now, absolutely that one has to sting.)

Furthermore, Netflix isn’t searching for studios in the identical means its rivals have been. Netflix’s technique as a substitute continues to be merely making itself higher. Put one other means, Netflix needs to be extra like social apps than different streaming companies. Its primary competitor within the house, in keeping with Netflix, is itself.

“Whereas we’re frequently evaluating alternatives, we don’t view any property as ‘must-have’ and we haven’t but discovered any massive scale ones to be sufficiently compelling to behave upon,” the corporate wrote in its shareholders letter. “Within the race to entertain customers world wide, we proceed to compete for display time with a broad set of corporations like YouTube, Epic Video games and TikTok (to call just some). However, we’re largely competing with ourselves to enhance our service as quick as we will.”

For a corporation that appears tired of searching for film studios, Netflix executives touched on the acquisition and consolidation race plenty of occasions in the course of the earnings name on Tuesday. Whereas Netflix is open to the suitable alternative, the corporate’s prime brass stated that Netflix is “choosy” on the subject of property and IP.

“Whereas we’re frequently evaluating alternatives, we don’t view any property as ‘must-have’”

To be clear, Netflix remains to be main within the ongoing battle for our eyeballs (and our cash). Netflix, which has round 209 million paid subscriptions, is most intently tailed by Disney Plus, which has roughly half that variety of paid memberships. With its decade-plus lead on different streaming companies, Netflix has extra runway to experiment with its product and take the sorts of dangers that smaller companies merely can not.

That brings us to video games. Whereas Netflix hasn’t given us a selected timeline for sport releases, past saying the initiative can be a multiyear endeavor, the corporate did say it believes “the time is true” to discover the growth. Netflix has stated repeatedly that it believes its major opponents are high-engagement venues like TikTok and Fortnite. However Netflix’s dive into gaming in earnest — quite than by way of one-off experiments like a Stranger Issues sport and even Bandersnatch — comes at a transitional time for the streaming large because the world begins to reopen and streaming faces new hurdles for hooking and retaining subscribers.

The corporate stated that it added 1.5 million paid memberships within the second quarter of 2021 over its 1 million steering forecast, even whereas it misplaced some 400,000 paid web provides. However whereas the corporate stated its enterprise is wholesome and its churn fee — the variety of members leaving the service — is down when in comparison with a extra “comparable” quarter from 2019, CFO Spencer Neumann stated in the course of the firm’s earnings interview that Netflix remains to be feeling “a bit of little bit of that drag when it comes to our acquisition development as we’re form of working by way of what we hope is — and we will’t be certain — however what we hope is the tail finish of this covid chopiness.”

When trying on the firm’s future challenges this fashion, Netflix’s massive guess on gaming tracks. It creates new methods to increase the shelf lifetime of content material and characters which can be already resonating with viewers. However what would Netflix video games even appear like?

Netflix believes video games will assist it construct engagement round its content material

Chatting with the corporate’s technique for gaming transferring ahead, Netflix COO and chief product officer Greg Peters reiterated in the course of the name that the corporate considered gaming as “an extension of the core leisure providing that we’ve been targeted on for the final 20 years.” It plans to develop video games for cellular first, although different codecs could also be thought of down the road. And whereas Netflix plans to experiment with its method to gaming, Peters stated it would embrace licensing alternatives, video games that construct on its current IP, and standalone video games. In response to Peters, that might even embrace a sport that generates sufficient hype to be spun into a movie or collection.

“Simply as we’ve repeatedly expanded our providing by including new genres, unscripted, movie, local-language programming, animation, on and on, we expect we’ve got a possibility so as to add video games to that providing and ship extra leisure worth to our members,” Peters stated. He added that the corporate deliberate to “begin comparatively small” and that Netflix’s foray into the gaming house can be a “multi-year effort.”

Whether or not the gamification of Netflix content material will assist it scale in any significant means is not possible to say proper now. However Netflix’s deal with content material and product over IP acquisitions and mergers — the popular play by most of its streaming friends at current — signifies that Netflix could be very a lot nonetheless working in a league of its personal.