Since Netflix’s streaming rivals like Prime Video and HBO Max’s WarnerMedia focus on consolidation and studio acquisitions, Netflix is instead prioritizing its own service and investment in games over getting available studio IPs. It’s a refreshing shift from buying ailing movie studios or long-forgotten catalogs. But will it work?
Netflix has outlined its streaming strategy in its second quarter letter to its shareholders. Citing recent mergers between WarnerMedia and Discovery and the last decade of acquisitions and mergers between major media properties — with Disney and Fox or Viacom and CBS, for example — the company said it “doesn’t believe this consolidation has affected our growth much, if not at all.” (If I’m a streaming service now, it should definitely sting.)
Plus, Netflix doesn’t shop for studios in the same way its rivals do. Netflix’s strategy instead just keeps making itself better. In other words, Netflix wants to be more like social apps than other streaming services. The main competitor in space, according to Netflix, is itself.
“While we are continually evaluating opportunities, we do not consider assets to be a must-have and have not yet identified large-scale assets compelling enough to take action,” the company wrote in its shareholders letter. “In the race to entertain consumers around the world, we continue to compete for screen time with a wide variety of companies such as YouTube, Epic Games and TikTok (to name a few). But most of all, we compete with ourselves to improve our service as quickly as possible.”
For a company that doesn’t seem interested in shopping for movie studios, Netflix executives spoke a number of times about the acquisition and consolidation race during Tuesday’s earnings call. While Netflix is open to the right opportunities, the company’s chief executive said Netflix is ”picky” when it comes to assets and IP.
To be clear, Netflix is still at the forefront of the ongoing battle for our eyeballs (and our money). Netflix, which has about 209 million paid subscriptions, is most closely followed by Disney Plus, which has about half that number of paid subscriptions. With more than a decade ahead of other streaming services, Netflix has more runway to experiment with its product and take the kind of risks that smaller services just can’t.
Which brings us to games. While Netflix hasn’t given us a specific timeline for game releases, the company not only said the initiative would be a multi-year venture, but said it believes “the time is right” to explore the expansion. Netflix has repeatedly said it believes its main competitors are high-engagement venues like TikTok and Fortnite. But Netflix is seriously diving into gaming — rather than through one-off experiments like a Strange things game or even Bandersnatch – comes at a time of transition for the streaming giant as the world begins to reopen and streaming faces new hurdles to snagging and retaining subscribers.
The company said it added 1.5 million paid memberships in the second quarter of 2021 from its forecast of 1 million, even as it lost about 400,000 paid net gains. But while the company said its business is healthy and its churn rate — the number of members leaving the service — is lower compared to a more “comparable” quarter from 2019, CFO Spencer Neumann said during the company’s earnings interview that Netflix still feel like “a little bit of that drag in terms of our acquisition growth, because we’re kind of working on what we hope is – and we can’t know for sure – but what we hope is the tail end of this covid greed. “
Looking at the company’s future challenges in this way, Netflix is betting a lot on gaming tracks. It creates new ways to extend the shelf life of content and characters that already resonate with viewers. But what would Netflix games even look like?
Speaking about the company’s strategy for future gaming, Netflix COO and Chief Product Officer Greg Peters reiterated on the call that the company viewed gaming as “an extension of the core entertainment offering we’ve focused on for the past 20 years.” It plans to develop games for mobile first, although other formats may be considered in the future. And while Netflix plans to experiment with its approach to gaming, Peters said it will include licensing capabilities, games that build on its existing IP, and standalone games. According to Peters, that could even be a game that generates enough hype to make a movie or series out of it.
“Just as we have continuously expanded our offering by adding new genres, without script, film, local language programming, animation, etc., we think we have a chance to add games to that offering and bring more entertainment value.” offer to our members’, says Pieters. He added that the company planned to “start relatively small” and that Netflix’s foray into the gaming space would be a “multi-year effort”.
Whether the gamification of Netflix content will help it scale in any meaningful way is impossible to say at this point. But Netflix’s focus on acquisitions and mergers of content and product rather than IP — the game of choice for most of its streaming peers right now — indicates that Netflix is still in a league of its own.