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Netflix is adding video games as a free add-on to its member subscriptions, the company said in a shareholder letter released ahead of its Tuesday earnings call.
While the letter said Netflix is still in the “early stages of further expanding into games,” the streamer’s offerings will first be “primarily focused on games for mobile devices.”
“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV,” the shareholder letter said. “We’re excited as ever about our movies and TV series offering, and we expect a long runway of increasing investment and growth across all of our existing content categories, but since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games.”
In Tuesday’s earnings interview, Netflix COO and chief product officer, Greg Peters, said the company’s goals for its gaming offerings would be to extend Netflix’s IP, create stand-alone games — some of which could be spawned into a series or film — and license games to help “increase the volume” of Netflix’s library.
“It’s a multiyear effort. We’re going to start relatively small. We’ll learn, we’ll grow,” Peters said. “Our subscription model yields some opportunities to focus on a set of game experiences that are currently underserved by the sort of dominant monetization models in games. We don’t have to think about ads, we don’t have to think about in-game purchases or other monetization, we don’t have to think about per-title purchases. Really, we can do what we’ve been doing on the movie and series side, which is just hyper, laser focused on delivering the most entertaining game experiences that we can.”
It’s not immediately clear when the company plans to launch its gaming offerings. But last week, Netflix hired Mike Verdu, a former Facebook and Electronic Arts executive, as its new vp game development. The expansion doesn’t end at just gaming, either: The streamer also hired N’Jeri Eaton, previously the head of content for Apple Podcasts, as Netflix’s first head of podcasts.
The changes signal that Netflix is not satisfied with just being a go-to streamer for users when they’re at home and wanting to watch a TV show or movie. By focusing on mobile-first offerings, Netflix appears to be more concerned with grabbing its users’ attention anywhere they are and at any time — something that Netflix alluded to in a 2019 shareholder letter.
“We compete with (and lose to) Fortnite more than HBO,” the January 2019 letter said. “There are thousands of competitors in this highly fragmented market vying to entertain consumers and low barriers to entry for those with great experiences. Our growth is based on how good our experience is, compared to all the other screen time experiences from which consumers choose. Our focus is not on Disney+, Amazon or others, but on how we can improve our experience for our members.”
At the time, Netflix co-CEO Reed Hastings also described the challenge as “winning time away” from other activities and competitors. “Instead of doing Xbox or Fortnite or YouTube or HBO or a long list, we want to win and provide a better experience: no advertising, on-demand, incredible content,” Hastings noted.
On Tuesday, Netflix reported $7.3 billion in revenue during the second quarter of 2021 — an increase from Q1’s $7.16 billion. The streamer said it has 209 million subscribers, thanks to an addition of 1.5 million subscribers in Q2.
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