Netflix has said it plans to be in gaming for years to come. Now the company is trying to figure out how to make money from it, a potential shift in strategy for the streamer.
Executives at the streaming giant have had discussions in recent months about how to generate revenue from its games, according to people familiar with the discussions.
Netflix games are currently free for all subscribers, part of a strategy to keep users coming back to the streaming service when their favorite shows are between seasons as well as to attract new fans.
Some of the ideas that have been discussed include in-app purchases, charging for more sophisticated games it is developing or giving subscribers to its newer ad-supported tier access to games with ads in them, the people said.
Such moves would mark a pivot for Netflix, which has resisted putting ads or in-app purchases in its games.
“We want to have a differentiated gaming experience, and part of that is giving game creators the ability to think about building games purely from the perspective of player enjoyment and not having to worry about other forms of monetization, whether it be ads or in-game payment,” Netflix Co-Chief Executive Greg Peters told investors in April.
Netflix encourages open debate internally on its strategy, which is a key pillar of its culture, and such discussions don’t mean the company will decide to monetize games.
The discussions are the latest example of how the streamer constantly reassesses the balance between customer experience and the need to make money. Netflix previously resisted such moves as cracking down on password sharing and launching an ad-based tier of its service because it worried about the consumer experience, before reversing course on both fronts in the past couple of years.
The number of users downloading Netflix games is growing, but it remains small. As of October, fewer than 1% of Netflix’s global subscribers were playing its games daily, Apptopia estimates.
Netflix has been clear that its gaming strategy, which began in 2021 and so far consists of mobile games that subscribers can download free, is a long-term bet.
‘Too Hot to Handle: Love is a Game’ has been downloaded seven million times since it launched in 2022. Photo: Netflix
Netflix has bought a handful of small gaming studios over the past few years and has started to create more games focused on its own shows and movies. Its most popular original game, “Too Hot to Handle: Love is a Game,” launched in December 2022. The game, which is tied to Netflix’s “Too Hot to Handle” reality show, has been downloaded seven million times, according to Sensor Tower.
The streamer also licenses popular games like “Grand Theft Auto: San Andreas,” which drove 11% of Netflix’s game downloads in 2023, according to Sensor Tower.
Analysts have estimated that Netflix has spent about $1 billion on buying gaming studios and building the business. The company spends about $17 billion a year on its shows and movies.
Overall, Netflix games were downloaded 81.2 million times globally last year, a nearly threefold increase from the 28.7 million downloads it had in 2022, according to Sensor Tower. That latest total is a fraction of the hundreds of millions of downloads for game companies such as Roblox and Activision, the publisher of the megahit “Candy Crush Saga.”
Netflix’s gaming budget is expected to increase as the streamer is pushing into making console-quality games. The company has posted jobs for dozens of game executives, including a director to oversee its first big-budget game. Such “triple-A games” can cost hundreds of millions of dollars to make.
That push is why Netflix has discussed possibly charging for those kinds of games, some of the people said.
Some Netflix executives and investors have questioned the strategy of the division. At a Netflix leadership meeting in 2022, an analyst from Capital Group, which holds a large stake in the streamer, questioned the value of the game push and expressed concerns it was taking resources away from programming, The Wall Street Journal reported.
Write to Jessica Toonkel at jessica.toonkel@wsj.com
They cancel shows that aren’t binge watched in the first eight weeks because of payment agreements made with the production companies. They have to pay royalties for all views that occur outside of that defined period. Which is still profitable, it’s just less so.
But they’re not interested in making good, watchable content. They’re only interested in profit, and producing a show which is watched immediately is what maximizes that profit.
Which is a model of profit that does not mesh with video games, adding to why this is a bad idea