What game is Netflix playing with games?
The streaming giant has largely kept quiet about its long-term plans for video games, which it began offering free to subscribers in 2021. On Wednesday, Netflix executives shed a bit more light on its plans, indicating that the company is not simply in mobile gaming as a side hustle to help prevent subscriber churn, but wants to develop gaming into a marquee part of its service that can lift the overall business.
“We believe that we can build games into a strong content category,” co-CEO Greg Peters said during the company’s earnings call on Wednesday. “Our current scale—and frankly, our current investment—are both very, very, very small relative to our overall content spend and engagement.”
“So now our job is to incrementally scale to a place where games have a material impact on the business,” he added. “We want to really grow our engagement by many multiples of where it is today over the next handful of years.”
There’s certainly room to grow. According to a recent study by data intelligence firm Apptopia cited by Investors Business Daily, a meager 1% of Netflix’s 238 million worldwide subscribers engaged with its games every day. On Wednesday Netflix said its total paid subscribers grew to 247 million in the third quarter, while revenue of $8.5 billion increased roughly 8% year-over-year, sending shares in the company up more than 10%.
Netflix doesn’t break out performance metrics or financial information for its games business, so it’s unclear how much money the company is spending on the effort or the impact it’s having on profit margins—though Peters noted that Netflix doesn’t need to spend money to acquire users for its games, thus avoiding a major expense that its competitors are saddled with.
And while the company has said in the past that it has no current plans to generate revenue from the games business through direct monetization, Netflix executives appear to view gaming as a legitimate growth driver—a feature that not only gives existing subscribers one more reason to be happy with a service whose monthly price Netflix just increased again, but that also compels new consumers to sign up for a subscription.
“Games engagement right now on our service drives core business metrics in a way which is incremental to movies and series,” Peters said on Wednesday.
Netflix is focusing on video game ‘title selection’ and awareness
With Netflix’s array of intellectual property, the gaming business isn’t a bad place to be. The global games market will generate $188 billion this year, half of which comes from mobile, according to a report by gaming data company Newzoo. Industry revenues are expected to rise to $212 billion in 2026.
Some of Netflix’s competitors are already in the market. Warner Bros. Discovery, which operates the Max streaming platform, publishes the Harry Potter–themed Hogwarts Legacy and the Lego game series for the Star Wars, Marvel, and Harry Potter franchises. The company doesn’t disclose gaming revenues, but some titles have proven lucrative. Hogwarts Legacy reportedly cost $150 million to make, and it earned $850 million in the first two weeks after launch, according to the company. Apple and Google, which also own streaming platforms, have mobile games businesses as well.
As of March, Netflix had released 55 games with 70 more in the works. It has acquired a series of development studios to support its vision, and it recently began testing cloud gaming in the U.S.
Many of Netflix’s games are based on some of its most popular movies and TV shows, including Stranger Things, Love Is Blind, and Queen’s Gambit, and in the coming months it will roll out games based on the series Money Heist and Virgin River.
Ted Sarandos, Netflix’s other co-CEO, touted such games as a “great experience for the super fan to get themselves in the universe in between seasons of a show.”
But there are growing signs that the goal is more ambitious than simple off-season loyalty. A Grand Theft Auto game for Netflix has been discussed, according to a recent Wall Street Journal report.
On Wednesday’s call with investors, co-CEO Peters cited “title selection” as a key driver of its future gaming growth, as Netflix leans on its vast troves of user data to offer more of the kind of games that resonate with users. Better product features in the games will also help, Peters said. And he suggested that Netflix will put more effort behind promoting its games.
“We have to do it by gradually improving consumer awareness, which is what we’ve seen as when we launched other content categories,” he said, likening games to some of the other entertainment offerings that Netflix has added to its catalog. “You can think about unscripted or you can think about film, that broadly lifts overall engagement metrics as consumers learn that we’re a place to go to, to find games.”