Netflix Games: Does It Make Sense to Pivot to Gaming?

Tuesday January 4, 2022

How can anyone question Netflix's motives? As the leading entertainment streaming service on the planet, their success has served as a shining example of how to fill a gap in the market. So, when it announced it was pivoting into the gaming sector, most people assumed it was the correct decision. Well, at least initially.

As time has gone by, it appears that Netflix Games may not be the smartest business decision the business had made in its relatively short life cycle.

A War on Several Fronts

When Netflix Games was made available to Netflix customers, it came on the back of some disturbing news — Netflix's hold on the entertainment industry is dwindling. Amazon Prime Video, for example, has caught up in terms of subscribers after it recorded as many as 200 million worldwide. Apple TV is appealing to audiences via its original programming, too, and is not far behind in the streaming wars. Netflix, meanwhile, is losing viewers in 2021.

Therefore, it makes more sense to focus on its primary source of revenue to ward off its nearest rivals, not expand into a market that will take a while to bear fruit in terms of profits. Of course, this is without considering the need for Netflix to compete with gaming giants in their backyards. Netflix already has ludicrous deals lined up with Nintendo and online casino developers, meaning the impact of games that center on its original shows, such as Stranger Things, won't be as significant since people are already playing them on different devices.

Indeed, movie and TV themes from the likes of Netflix have transformed gaming industries, making them uber-successful across media platforms. The online casino sector is the clear winner here because specific regions, like Philadelphia, are booming on the back of the popularity of operators' libraries. As a result, Philadelphia is the second-largest market in the US in terms of revenues, highlighted by the 77.5% increase from March to April 2020, as well as the number of top brands that have moved into the region, from Unibet Casino to FanDuel Casino, which is reflected by this list of PA online casinos available to customers in Philadelphia. Not only does Netflix have to take on Amazon and Apple, but it must beat casino operators with only four games at its disposal, compared to the tens of thousands that online casinos offer. That's only in one state, too.

Scalability Is Proven to Be Tough

Netflix may believe it can make Netflix Games profitable, yet history suggests otherwise. Over the years, a handful of major brands have tried to break the glass ceiling, only to admit defeat in the long run. The Disney Infinity gaming division is notorious for generating $1 billion in revenue and produced high-quality games. Regardless, it shut down due to the size of its overheads.

Google's Stadia is the same because it has been around for years and hasn't made the headway Alphabet wants, despite its parent company's formidable resources. This is made more complicated by the fact that Netflix doesn't own any console or mobile platforms, which are essential to the future of Netflix Games. Sadly, for Netflix, the costs could be greater since it will need to pay a middleman to host its games. The Apple Store takes a 30% cut of profits and is hard to bypass seeing as 70% of the mobile distribution is on iPhones.

From this perspective, it doesn't make sense for Netflix to pivot to gaming, not when it will cost it a fortune to protect its bottom line. That's without making a profit. Only time will tell, yet it seems as if Netflix Games has a rocky journey ahead of it since its competitors are growing stronger or have already tried to launch similar services but to no avail.