Netflix has recently expressed plans to add gaming to its services, which could be its most successful move yet. Since user growth has slowed down in the past twelve months, this plan could bolster membership significantly and increase stock prices, enabling it to beat its competitors.
However, this new service also raises the question of what this means for the future of cloud based gaming. Could this transpire to be a threat to the gaming industry?
As user growth is currently stagnating, Netflix has been searching for new ways to increase membership. According to InvestingCube, it has failed to maintain its $560 level in the last 12 months, and is only reflecting 10% of the 10 million users added in the first half of 2020.
To gain valuable insight into the gaming industry, Netflix hired former Facebook executive Mike Verdu, previously an EA and Oculus executive, to be the vice president of game development.
Netflix previously tested the waters with ‘choose your own adventure’ stories such as Black Mirror: Bandersnatch, which was popular among users at the time of release, leading many to believe that offering a video game service could be fruitful for the company.
The gaming industry has become increasingly more profitable throughout the pandemic: 2020 saw a 39% increase in time spent playing video games.
Also in 2020, following the beginning of the pandemic, Nintendo’s Animal Crossing: New Horizons boosted the company’s profits to 106.4bn yen (£770m) compared to 16.6bn yen the previous year.
This was one of numerous games which offered an escape from the drudgery of lockdown, and has reaffirmed that gaming can be a hobby for all.
As Netflix offers media content for all ages, its latest move has raised the question: could cloud gaming be the revenue-boosting move to outmatch their competitors?
Cloud gaming, in short, is a type of online gaming service which enables you to stream video games straight to your device, without the need for a console. This makes it a cheaper, easier, and more accessible option for many.
Even as of 2019, other platforms such as Playstation and Xbox were considering branching out into cloud gaming services due to the increased demand for them.
But what are the challenges that Netflix needs to consider?
It is difficult to imagine how Netflix will be able to manufacture and distribute games that could cost over £85m each by only charging £9.99 per month, and so it may need to charge extra for its gaming service to make a significant profit.
It is also facing increasing competition from YouTube, whose television viewing is growing at a rapid rate; 120 million people watched YouTube on a TV last month, compared to 100 million per month last year, according to The Verge.
Google Stadia and Playstation Now also illustrate what could happen if Netflix’s cloud gaming services do not take off. There are numerous factors to consider in the area of game streaming, which could limit the user’s experience. In contrast to consoles, Smart TVs lack the processing power and hardware for complex games and so Netflix would have to provide streamable games that are relatively simple.
However, many forget that Netflix is still accessible on consoles such as PS4 or even Nintendo Wii, which means that these users could stream from Netflix directly onto their console.
On the other hand, Sony’s errors in marketing its cloud gaming platform could serve as inspiration for Netflix. Since Sony missed out by not introducing a Playstation Now mobile app, Netflix could take its own service one step further and develop an app exclusively for phone games.
It is already planning to expand into mobile games first before becoming available on other devices, which appears to be a step in the right direction.
Adding gaming to Netflix’s services could be a profitable response to its growing competition, especially if it learns from previous cloud gaming endeavours instead of making the same mistakes.
Will the forty billion pound company manage to succeed, and what will this reveal to us about the future of gaming? The story continues.