Netflix games are coming – and the reasons are very Netflixian

For the first time, Netflix executives spoke at length about the company’s video game aspirations. Their rationale for expanding the company’s product offerings was very … Netflixian.

On the surface, Netflix will start offering mobile games to subscribers at no additional cost to add value to the service. The number of subscribers in the United States and Canada fell by 400,000 in the second quarter, indicating that activity could reach saturation point in the near term. Adding video games can attract new customers while reducing the churn rate.

“The success of this initiative is largely down to the big games,” Netflix COO and chief product officer Greg Peters said on his company’s second quarter earnings conference call Tuesday. “We believe we can deliver more entertainment value through [games]. “

But pull the curtain back, and it’s clear that Netflix picked video games as one of the company’s first non-video business ventures because of two themes: data and intellectual property.

These two concepts are at the heart of Netflix’s success as a video streaming service. Netflix has revolutionized video streaming by using streaming video data to recommend what a person should watch and to guide the production of original content. The value of the intellectual property owned has led to a global shift in media distribution, as companies increasingly curate their own creations and distribute content themselves via streaming rather than widely selling programs to companies. other.

The results led Netflix to dominate the entertainment world with 209 million subscribers worldwide and a series of subscription-based streaming services from every media company. They have also led to a creative product that some find awkward and not in the spirit of making art.

“These streaming services have done something they call ‘movies’,” Barry Diller, who previously managed Paramount Pictures and 20th Century Fox, said earlier this month. “These aren’t movies. It’s weird algorithmic processes that created things that last about 100 minutes.”

Peters acknowledged that the company “will learn, grow and refocus our investment on what we see working” with games. He noted that the game provides “intentionality,” allowing users to dictate which characters they want to spend time with in different parts of a game world.

This user-based decision making will not be ignored by Netflix. On the contrary, it will guide Netflix not only in making better games, but also in making creative decisions. If a Netflix-owned series has a character used extensively in games, one could easily imagine that character will feature more prominently in a future season of the series.

“Maybe one day we’ll see a game that spawns a movie or a series,” Peters said. “It would be an amazing place to go, to really see the rich interplay between these different forms of entertainment.”

While Peters noted that Netflix will license certain games – just as Netflix has built its video service on the backs of TV show and movie licenses – he said Netflix’s intellectual property is a key differentiator. compared to other rivals in space.

“The first of those [differentiating factors] is about the intellectual property we create, “said Peters.” We know the fans of our stories want to go deeper and be more engaged. The great thing about interactive is that you can provide universes that provide a significant amount of time for people to engage and explore. “

This “significant delay” is another key principle of Netflix: keeping users within the business ecosystem. That’s why Netflix founder and co-CEO Reed Hastings once said that even sleep should be considered a Netflix competition.

Gaming isn’t going to become an independent revenue driver anytime soon. Hastings called Netflix a “one-product company with a bunch of supporting elements.” But for anyone who didn’t understand why Netflix would abandon its famous focus on streaming, the rationale is clearer today: Hastings is hoping what worked for video will work for games again.

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