Netflix deepens video game push, ripping page from its Hollywood script

Last year Netflix put up a billboard on Los Angeles’s Sunset Boulevard to poke fun at itself. It read: "Wait, Netflix Has Games?"

The company is working hard to clear up any confusion. It is deepening its push into the videogame industry, taking advantage of the studios it has acquired in the past two years to create more titles based on popular Netflix movies and TV shows.

Though Netflix has up to now focused on mobile games—which appeal to casual gamers and can be downloaded on a smartphone or tablet—it is taking steps to expand into higher-end games that can be streamed from TVs or PCs. That approach would put it up against giants such as Sony and Microsoft, which just closed its $75 billion acquisition of Activision Blizzard, and would bring some significant technical challenges.

Over the next several months, Netflix subscribers will be able to play games on their mobile devices based on hits such as Korean thriller "Squid Game" and supernatural comedy "Wednesday," according to people familiar with the situation. Similarly, Netflix is discussing games based on "Extraction," its Sherlock Holmes series and its "Black Mirror" series, the people said.

Even as Netflix creates homegrown titles, it will continue to license the well-known games, from "Bloons TD 6" to "Classic Solitaire," that currently make up its catalog. It has discussed plans to release a game within the popular action-adventure series "Grand Theft Auto" from Take-Two Interactive Software through a licensing deal, some of the people said.

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The strategy rips a page from the streaming giant’s playbook in Hollywood, where it built an audience based on reruns from other studios—such as "Friends," "The Office" and "Breaking Bad"—while gearing up machinery to churn out originals like "House of Cards" and "Stranger Things."

Netflix faced scant competition in the early days of its ascent in streaming video. Gaming is different. It is a decades-old industry dominated by some of the world’s biggest tech companies, with global sales expected to reach $187.7 billion this year, according to research firm Newzoo.

Netflix doesn’t generate revenue from its games. Subscribers can download them from the app at no extra charge. For now, games are part of a strategy to keep fans coming back to the streaming service even when their favorite shows are between seasons, helping to retain subscribers and attract new ones. Netflix, which reports quarterly results on Wednesday, added 5.9 million subscribers in the June quarter.

Netflix games have been downloaded 70.5 million times globally as of Sept. 20, up from 30.4 million last September, according to app tracker Apptopia. That is a fraction of the hundreds of millions of downloads for game companies such as Roblox and Activision, the publisher of the megahit "Candy Crush Saga." Fewer than 1% of Netflix’s 238 million subscribers are playing Netflix’s games daily, Apptopia estimates.

Netflix declined to comment. 

Gaming is a draw for media companies in adjacent industries because of how much time people spend playing.

The New York Times has had success turning many of its subscribers into players of its casual games like "Wordle" and "Spelling Bee." Netflix has to make a similar case with its own customers. 

"Would a non-gamer play a Netflix game?" said Judah Silver, an agent with United Talent Agency who works with game developers. "That is the big question."

It is also unlikely that videogame enthusiasts would subscribe to Netflix just to access its games. Many Netflix games can be purchased or downloaded for free through other platforms, including "Exploding Kittens" and "Teenage Mutant Ninja Turtles: Shredder’s Revenge." 

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Luis Ruvalcaba, a 38-year-old gamer and insurance professional who lives near Indianapolis, said he doesn’t subscribe to Netflix and wouldn’t sign up just to access its games. "I don’t see myself ever getting a Netflix subscription for gaming," he said, adding that he already subscribes to Xbox Game Pass and PlayStation Plus.

Mobile games have their drawbacks. Netflix has found that about half of the subscribers who press the "Get Game" button on the app actually go on to play it, according to a person familiar with its game operations. That might be because in some cases, subscribers have to go to Apple’s App Store to finish downloading games. Also, the games take time to download and eat up memory.

Billion-dollar bet

Netflix will have to step up its investments to make console-quality games, said Jefferies analyst Andrew Uerkwitz, who estimates the company has spent about $1 billion on games so far. 

Netflix is looking to hire dozens of game executives and has posted a job for a director to oversee its first big-budget game. Such "triple-A" games can cost hundreds of millions of dollars to make. The recruits will join a team of around 400 people.

At an internal Netflix leadership meeting in 2022, an analyst from investor Capital Group, which holds a large stake in the streamer, questioned the value of the game push and expressed concerns it was taking resources away from programming, according to people familiar with the situation.

Inside Netflix, backers of its game foray point to a heightened urgency to attract and retain customers, especially since the company last year saw its first decline in subscribers in over a decade. Offering games can help the company justify the cost of a subscription as it raises prices, which it plans to do again in coming months, The Wall Street Journal reported. 

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"Netflix needs to get this right if they are going to get people to spend more time with them," said Brandon Ross, an analyst with LightShed Partners. 

Ticker	Security	Last	Change	Change %
NFLX	NETFLIX INC.	902.23	+18.38	+2.08%

Netflix executives decided to get into games in 2020 during the height of the Covid-19 pandemic. At the time, Netflix subscriptions were growing rapidly as people were stuck at home, but executives were aware that to keep its edge, Netflix had to continue to offer more kinds of content.

Top executives debated a few ideas for keeping subscribers engaged—including creating educational classes where celebrities could teach subjects such as cooking or the art of negotiating—but settled on games, said people familiar with the discussions. 

Netflix hired Mike Verdu, who previously oversaw game studios at Meta and Electronic Arts to lead the initiative. Verdu would tell colleagues that there is a game out there for everyone, even for those who don’t consider themselves gamers. 

In September 2021, the company bought Night School Studio, which created Netflix’s first internally developed game, "Oxenfree II," a sequel to Night School’s earlier "Oxenfree" game in which a young girl finds herself with friends on a haunted island. The following year, the company acquired Boss Fight Entertainment, which makes action and storytelling games, and Next Games, which had made games based on properties such as Netflix’s "Stranger Things" and AMC Networks "The Walking Dead."

Netflix’s games team is working closely with the teams involved in releasing programming to coordinate timing, according to people familiar with the situation. Five of Netflix’s most downloaded games are based on its own shows and movies, according to market-intelligence firm Data.ai.

Adam Wood, a 48-year-old avid gamer, said he enjoys Netflix’s games and lately has been consumed with "Into the Breach," in which players try to save the Earth from gigantic aliens. Wood said he probably wouldn’t subscribe to Netflix just for its games. They are "like an awesome bonus," he said. "It is definitely a nice-to-have."

Phone controller

Netflix is already starting to move beyond the phone with a new app, "Netflix Game Controller," that can turn your phone into a controller so that games can be played on a TV or computer. The company is testing the app in Canada and the U.K.

Some Netflix executives were concerned that this approach might limit the kinds of games the company can offer: Action games would likely require a more traditional game controller, with protruding buttons. Netflix decided to opt for the phone approach, despite the limitations. 

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Moving into streaming games—also known as cloud gaming—would make sense for Netflix, given the limitations of downloadable mobile games. But cloud-based gaming is expensive and difficult to execute. 

Unlike movies and music, games are interactive, with highly detailed images created in real-time based on players’ actions. Google struggled to succeed with its cloud-gaming subscription service Stadia, which launched in 2019. It closed that business earlier this year.

Google’s challenges have come up in internal meetings at Netflix as some employees have asked why Netflix is looking to go deeper into a market where such a titan has failed, said people familiar with the situation.

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Netflix co-CEO Greg Peters has reiterated the company’s commitment to games. "We know we’re not going away…because someday we’re going to be everywhere with games across all devices that we serve," he told investors in September.