Netflix To Move Into Video Games, After Slowest Growth In 8 Years

Sunday, August 8, 2021

Netflix is adding a new element to its service: video games. This new addition looks to have sprung from the worst growth in subscriber numbers that Netflix has seen in eight years. Speculation is that this fall in growth has come from people turning more outwards and trying to move on from pandemic habits.

Last Tuesday, Netflix made the announcement that video games will be included in its current subscription plans, for no extra money. However the company did not comment on when this service will become available as well as the types of games that will be on offer.

An offer of this sort has been speculated about for a long time, the latest announcement was delivered alongside the most recent earnings report. Within Netflix’s latest financial analysis, they described that 1.5 million subscribers were added to the platform in the period of April-June.

During the first six months of the year, Netflix made a net gain of 5.5 million subscribers, which is the poorest performance the platform has had since 2013. The previous poor performance was during a period of time when Netflix was focussing on creating original programmes, moving away from the original model of getting licenses for TV shows and films and showing them on its platform.

Fast forward to the present time, Netflix is partially changing direction again, and will offer video games to subscribers. As part of this service, Netflix plans to create the video games themselves, as part of a business expansion plan that will take a number of years.

In a discussion with investors last Tuesday on the subject, Netflix co-CEO Reed Hastings said, ‘The reason we're doing them is to help the subscription service grow and be more important in people's lives’. Continuing on from this, Netflix’s chief product officer also said that the company will primarily focus on mobile games to begin with, with the plan to expand into consoles and TV sets further down the line. The first thought is that the games will be linked to some of the most popular shows on Netflix, however there could also be some standalone titles too. Peters finished by saying, ‘there’s a big, big prize here, and our job is to be really focused.’

Even with the slowdown of growth this year, Netflix is still the largest streaming service in the world, by a long way as well. At the end of June, there were 209 million subscribers to Netflix around the world. However the market is getting more and more competitive and contains some of the biggest names out there, including Disney, HBO, Amazon and Apple.

Alongside all this, there has been consistent profits in Netflix’s track record. Comparing the business to itself the year before, revenue rose by 19% up to 47.3 billion. Share prices almost doubled over the last year as well.

The poor numbers from the first half of this year can be seen as a response to the frenzy that happened for home entertainment as people were forced inside because of lockdowns around the world. In this time people turned to streaming services such as Netflix to keep themselves entertained. As part of this situation, in the first half of 2020, Netflix made 26 million subscribers. People did anticipate that Netflix would not be able to keep up that level of growth, however the drop that has been seen did come as some surprise. As a result, shares in Netflix fell by roughly 10%.

Management from Netflix has attributed some of the reasons for poor growth towards production delays caused by Covid-19. A number of the streaming platform’s biggest shows have had to delay their creation and release schedules. Some analysts are anticipating that the second half of the year will show an improved performance as new seasons of popular shows are being released.

It will be interesting to see how the change of direction towards including video games in the Netflix service works out. Online gaming is a huge industry and there is massive amounts of money to be made. However the sector is extremely crowded already, by some equally giant tech companies. Netflix navigating this new sector and carving out a unique corner of the market could be a huge commercial success if done correctly, only time will tell if that is the case.