Netflix is getting into gaming. The company’s new second-quarter shareholders letter seems to confirm reports from last week that the streaming giant is expanding into more interactive entertainment by providing the first real details about its gaming strategy.
In the letter, released before its Q2 earnings report on Tuesday, Netflix explains that gaming will become a new content category for the service, alongside its movies, TV series, and reality programming. Netflix’s games will focus on mobile devices initially and will be included in the subscription price, like all of the service’s other content, and will mostly be focused on existing Netflix IP. The games will also not have in-game ads or in-game purchases, according to Netflix COO Greg Peters.
It’s worth noting that while this was surely in the works for a while, this move comes at an interesting time for Netflix. Last quarter, the streaming service missed its expected growth numbers, citing a weak slate of content as one of the primary reasons. Meanwhile, in Tuesday’s earnings report, Netflix reports that it lost 400,000 subscribers in the US and Canada this quarter. This is the first time it’s lost subscribers in the region since Q2 2019, though it has gained 7.5 million subscribers in the two countries since then.
The letter explains that, because it has been nearly a decade since Netflix first pushed into original programming, “we think the time is right to learn more about how our members value games.” In other words, the company views its gaming ambitions as an experiment, or a potential way to bolster subscriber slumps from weaker original content, should the company experience them in the future. While mobile games may not have the same buzz that a big new show might, they could provide subscribers with enough reason to stick around and not cancel their subscription, especially if those games are tied to Netflix shows that subscribers already love.
While it remains to be seen whether or not Netflix can tap into the mobile gaming market, it’s already clear that its members value games quite highly. In fact, in an earnings letter from 2019, Netflix said that the streaming service’s main competition wasn’t networks like HBO but rather video games like Fortnite. Tuesday’s earnings letter offers a similar sentiment, stating that Netflix is competing for screen time with “firms like YouTube, Epic Games, and TikTok (to name just a few). But, we are mostly competing with ourselves.”
According to a study from the NPD, mobile platforms are the most popular in the world at the moment, particularly after huge growth in both the US and Canada during 2020. And that’s even more compelling for other regions. Netflix’s earnings letter says that Asia and the Pacific (APAC) represent two-thirds of its growth in the last quarter. These are regions where mobile gaming is extremely popular, such as in countries like India.
Whatever the larger reasons behind it, Netflix’s foray into gaming is a way for the company to reach beyond its current original programming. Of course, with the experiment only just starting, it could be a few years before we, and Netflix, see whether its games will be successful.