In recent months, numerous statements, staffing hires and articles published in the international media have made it certain that Netflix, the most important streaming company of films and TV series in the world, is about to enter the competitive and crowded video game sector. The company recently hired an executive with thirty years of industry experience, Mike Verdu, as the vice president of the business that will develop video games to be published on the platform, and is looking for other similar figures. This move will initiate a new strategy that could help the firm diversify its revenue sources and extract more value from the video content created for its platform.
In recent months, the company’s executives had anticipated their willingness to enter the video game market, which effectively competes with that of streaming video content for people’s attention during their free time. But this market, albeit vast and growing, is characterized by fierce competition and in recent years has attracted companies with large funds to invest and competitive advantages to exploit such as Google, Apple and Amazon.
Mike Verdu is a 56-year-old manager who for the past two years has worked at Facebook, where he managed the branch that deals with games for Oculus virtual reality headsets. Before that, he had accumulated eight years of experience at Electronic Arts – one of the largest video game producers in the world, where he recently ran the mobile gaming branch that includes titles such as Fifa e The Sims -, and three years at Zynga, the manufacturer of FarmVille. In addition to the position held by Verdu, among the positions currently vacant on the Netflix site there is another one whose duties include “shaping narrative and gaming experiences”.
According to sources inside the company cited by Bloomberg, Netflix plans to offer video games on its platform alongside movies and TV series by next year, without charging a premium for the new service (at least for the time being).
The firm’s interest in this market had been evident for some time. Last April, the company’s chief operating officer, Greg Peters, said that video games would become an “important part” of the user experience on Netflix in the future, explaining that the goal would be to increase the moments of connection with the public and root users’ attachment to the platform.
The same goal had moved the company to explore new formats, such as the interactive episode of the TV series Black Mirror released in 2018 or the interactive animated film Carmen Sandiego released last year in Canada and the United States. These films gave the audience the opportunity to make choices during the development of the story, directing the plot towards one of several possible endings. Furthermore, in 2019 Netflix had taken a first step in the video game industry by licensing the rights to Stranger Things 3, the third season of one of his most popular series, to a third company that made it a paid smartphone video game: Stranger Things 3: The Game.
The new strategy, however, seems something completely different, born from Netflix’s awareness of being in direct competition with the video game market: people’s free time is a limited resource, and when a person decides to spend the evening playing Call of Duty on his smartphone, he is at the same time deciding not to spend it watching a series on Netflix. Reed Hastings, co-founder, president and co-CEO of Netflix, has often said that he sees video games as his biggest competitor: “We compete (by losing) with Fortnite more than with HBO [rete televisiva a pagamento americana]He wrote in a letter to shareholders last January.
Furthermore, the competition in the streaming market has also become increasingly high in recent years, with the publication of new services that offer original and exclusive content that is very attractive to certain audiences, such as Disney + Amazon Prime Video.
And while Netflix remains the world’s dominant company with over 200 million subscribers in its field, growth in the number of subscriptions to the platform has slowed this year, probably due to the easing of pandemic restrictions that have given to more alternative entertainment people. This loss of attractiveness could be compensated for by offering video games, which would not only attract new customers more interested in games than movies and series, but would help keep users active on the platform longer: if a series is enough to finish. a night of binge watching, a game can keep the user busy for weeks. This could reduce the churn rate of platform users, i.e. the speed at which it loses users.
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While Netflix will initially include video games for free and ad-free in the subscription package to its platform, they could generate significant revenue for the company in the future. There are an estimated 2.7 billion gamers worldwide, and total video game spending is projected to reach $ 200 billion in 2023, up from an estimated $ 176 billion this year. Of these, roughly half should be spent on smartphone games, which are what Netflix would be aiming for according to Wall Street Journal, because they should be able to be played on both the TV and the company’s app.
Another benefit Netflix would gain from adding games to its platform would be that it can value its video content more than it can now. Video games based on the stories of Netflix Original series and movies would help keep audiences emotionally attached to the characters, creating a community of fans that would keep interactions within themselves and with the platform far longer than after the launch of the new season of. a TV series, which is often talked about a lot only in the early days.
Through games, Netflix can extend the time its content is deemed relevant, because players often create parallel communities online (on platforms like Twich or YouTube) to talk about their favorite video games or to watch others play in streaming.
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The video game market, however, is highly competitive, and other video content creators have tried the same path as Netflix with unsatisfactory results. Disney, for example, closed its video game studio, Infinity, in 2016 after a drop in sales, posting a loss of $ 147 million.
Since then, competition has increased further: in addition to that of historic companies such as Ubisoft, EA and Activision Blizzard, as well as those that dominate the console sector such as Microsoft (which produces the Xbox and now has 23 production studios of its own) and Sony (which launched the PlayStation 5 last year), in recent years has also been joined by operators offering cloud games such as Google, which launched the Stadia platform in 2019, and Amazon, which last year close agreement with Ubisoft to be able to offer some video games on its streaming platform Luna.
The competition is high and the competitors are huge companies with a lot of money to spend. And to produce video games it is necessary to spend a lot of money in the development of a series of titles, of which very few will manage to become a success.
Finally, to offer games on their app on iPhone and iPad, Netflix will need permission from the Apple App Store. But Apple is investing heavily in promoting new titles to expand the catalog of Apple Arcade, its subscription video game service.