Netflix Subs Model Yields 'Opportunities' for Games Foray: COO

Netflix views its foray into games “as an extension of the core entertainment offering that we’ve been focused on for the last 20 years,” said Greg Peters, chief operating officer and chief product officer, on a Q2 video earnings interview Tuesday. Just as Netflix has “continuously expanded” into new content genres, “we think we have an opportunity to add games to that offering and deliver more entertainment value to our members through that,” he said.

The push into games is in “the early stages,” said the Netflix Q2 shareholder letter Tuesday. Games will be included in members’ subscriptions at no additional cost, with the initial focus on games for mobile devices, it said: “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.” Netflix beat its global net subscriber additions target by 54% in Q2 (see 2107200068), and it’s forecasting 59% year-over-year net adds growth in Q3.

Similar to what has happened in the Netflix growth “trajectory” when it added new genres like unscripted film, local language programming or animation, “that’s what we expect will happen with games,” said Peters. “It’s a multiyear effort. We’re going to start relatively small. We’ll learn.” The plan is to focus “our investment based on what we see is working, and we’ll just continuously improve based on what our members are telling us is working.”

Peters is “really excited about a bunch of different ways” in which Netflix can provide a games offering “that is differentiated from what’s out there already,” he said. It starts with the quality of the intellectual property “that we create,” he said. With Netflix in the business of making “great storylines,” he said, “we know the fans of those stories want to go deeper, they want to engage further,” through content interactivity. “There’s a lot of exciting things that I think we can do in that space.”

The Netflix subscription model “yields some opportunities to focus on a set of game experiences that are currently underserved by that sort of dominant monetization models in games,” said Peters. “We don’t have to think about ads, we don’t have to think about in-game purchases or other monetization. We don’t think about per title purchases.” The plan is to do in games “what we’ve been doing on the movie and series side, which is just stay laser-focused on delivering the most entertaining game experiences that we can,” he said.

Netflix is finding that many game developers “really like that concept and that focus and this idea of being able to put all of their creative energy into just great gameplay,” said Peters. They need not worry about “other considerations” that they typically had to “trade off with just making compelling games,” he said. “Those are some of the core things that we’re excited about and think that can make this effort for us special.”

Mobile is “a great platform for games,” said Peters. “It’s very mature. It’s got great enabling technology, tools, a great developer community, and the vast majority of our members have phones that are capable of great gameplay experiences.” Mobile will be a “primary focus for us” in games, “but ultimately, we see all of the devices that we currently serve as candidates for some kind of game experience,” he said.

Netflix has been delivering “lighter-weight, interactive experiences” on TVs and connected devices “for some time.” said Peters. “You can call those games, or you can call them interactive experiences.” The plan is to “keep innovating in that space” by being “experimental,” he said. “We’re going to try a bunch of different games through a variety of different mechanisms to see what’s really working for our members.”

One future focus will be on games “that extend our IP,” said Peters. “We think that’s a really rich, rich space, so that’s very much part of our long-term thesis.” The ultimate “success of this initiative” will be around “great games,” and those can come “from a variety of different sources,” he said. “Maybe someday, we’ll see a game that spawns a film or series.”