last November, netflix (NFLX -4.59%) launched five mobile games directly integrated into its application: Stranger Things: 1984, Stranger Things 3: the game, shooting hoops, Map Explosionand Flip up.
Over the next six months, Netflix expanded its lineup to 18 games and purchased three game studios – Night School Studio, Next Games and Boss Fight – to ramp up its production of new games. It could offer almost 50 games by the end of this year, according to The Washington Post.
Netflix games can be downloaded from Applethe App Store and Alphabetof Google Play, but only its streaming video subscribers can access it. Netflix might believe that this strategy can increase the stickiness of its ecosystem, but it really doesn’t make sense for a few simple reasons.
Netflix is losing subscribers again
Netflix’s stock recently fell to its lowest level in more than four years as it lost subscribers for the first time in more than a decade.
Total subscribers fell by about 200,000 to 221.64 million in the first quarter, and he expects another loss of about 2 million subscribers in the second quarter. He mainly blamed the slowdown on tougher competition from other video streaming platforms such as waltz disney, Discovery of Warner Bros.from HBO Max, and Amazon (AMZN -14.05%) Prime.
Netflix also said it would crack down on password sharing and develop a cheaper ad-supported tier to appeal to “ad-tolerant” viewers. These two movements strongly indicate that there is a lack of new subscribers. Adding a few dozen free games as an added benefit probably won’t stop the bleeding.
Following in Amazon’s footsteps could be expensive
Netflix’s foray into games appears to be a direct response to Amazon adding video games to its Prime ecosystem. However, Amazon’s gaming business struggled and lost money on dead-end projects for years before launching the hit multiplayer online game. New world Last year.
Amazon’s video game ecosystem also includes Fire OS games, popular game streaming platform Twitch, and new cloud gaming platform Luna. If Netflix really wants to go toe to toe with Amazon in the games market, it’ll have to spend a lot more money – but that money would arguably be better spent producing new shows and movies instead.
It wouldn’t be the first time that Netflix has randomly expanded into Amazon’s backyard. Last year, she launched an online store for clothing and other retail products. It also opened a physical store in Tokyo to showcase these products. It has yet to expand this nascent retail ecosystem, but it does indicate that Netflix is suffering from an identity crisis as its growth slows.
It should work with third-party partners instead
Netflix believes that tie-in retail products and games can amplify the popularity of existing TV shows or movies on its platform.
During last quarter’s conference call, Chief Operating Officer Greg Peters noted that Netflix’s parallel launches of a video game and an animated series for Explosive kittens highlighted “the interplay between these two different modes for fans of this IP”. Co-CEO Ted Sarandos also expressed confidence in creating a “big stream of revenue and profit by adding games” over the long term.
This strategy seems sound, but it would be more profitable for Netflix to license its IP addresses to experienced third-party game developers instead. That’s precisely what Disney, which closed its in-house video game development studios in 2016, has done with its top franchises.
The same can be said about Netflix’s retail experience: it could simply license its intellectual property to other apparel retailers instead of operating its own online and physical stores. that’s why bilibilithe Chinese streaming video platform that hosts popular anime series has signed an e-commerce partnership with Ali Baba‘s Taobao to sell related products.
Is Netflix running out of ideas?
Netflix has successfully transformed from a DVD-by-mail rental service to the world’s leading paid-video streaming platform, but it’s unclear whether it can scale back as its market grows. main becomes more fragmented and saturated.
Its growing video game business indicates that it is testing new ways to expand its top franchises, but launching a few tie-in games is unlikely to save it from losing more subscribers.
The success or failure of Netflix’s video game business alone will not have a material impact on its near-term growth. However, the expansion of this business indicates that the streaming giant may have new ideas.