Why Netflix has no choice but to invest heavily in video games

Despite hits like Squid Game in 2021, Netflix’s Q4 figures show the streaming giant is struggling to maintain a competitive edge. The American company did not achieve its objectives. Netflix no longer hides its ambition in video games, a step that now seems essential for its development.

The video game industry is going through a moment that will mark its history. Less than two weeks after Take-Two announced its acquisition of Zynga ($12.7 billion), and just days after Microsoft announced its intention to acquire Activision-Blizzard-King for $69 billion, Netflix co-founder and co-CEO Reed Hastings said that Netflix has an important role to play in this industry.

“We have to be different in this area,” Reed Hastings said on Netflix’s earnings conference call. “When mobile gaming is front and center and we’re among the top producers, like in cinema today, it’s time to ask what’s next. “.

Not too long ago, Netflix was one of the hottest players in the stock market, but those days are over. The company’s share price reached $700 in November 2021, but has since fallen to around $400 after the latest results.

Precisely, Netflix closed the year 2021 with 221.8 million subscribers. It is the industry leader, even ahead of Disney (118.1 million subscribers in October 2021), but the number of Netflix subscribers only increased by 9% in the last 12 months, and that, despite the period current. Netflix is ​​gaining subscribers at a painfully slow rate, and the competition will only intensify.

The problem with relying solely on subscriptions to generate income is that, after a while, it becomes increasingly difficult to acquire. This is bad news for Wall Street investors who are more concerned about companies’ ability to grow. Increasing the price of subscriptions and limiting account sharing are two quick solutions to implement, but these cannot be done indefinitely.

The video game is an essential step, but very difficult

Netflix and video games are a titanic task, the American giant starts from (almost) zero. Greg Peters, manager of Netflix, said that Netflix would be forced to withdraw licenses from intellectual property that everyone knows about. Netflix has, of course, used this strategy before in streaming. The American company bought the streaming rights before slowly embarking on original content production. Today, Netflix spends billions of dollars each year creating original content.

It is clear that, at the moment, Netflix’s foray into video games is very timid. There are about ten mobile games, on iOS and Android, offered to all subscribers. This ambition of Netflix will undoubtedly go through the great current consolidation of the sector. And, there are still many candidates: Take-Two, Electronics Arts, Ubisoft, Sega, Square Enix…

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