Netflix is facing a formidable challenge as it expands into video games to keep the attention of customers in the increasingly competitive world of streaming television. The streaming television leader offered details of its plans to move into games in its latest update confirming cooling growth even as the Silicon Valley giant spins off hit shows. Analysts said the Netflix move is not aimed at disrupting the expanding gaming market but keeping its own viewers interested by offering new kinds of content.
"Entertainment and tech brands are adding gaming because it is adjacent to their video products, which makes gaming a somewhat natural extension of what they already do," said eMarketer analyst Ross Benes.
"Adding gaming allows them to suck up more of people's time and become further embedded within their customers' daily habits." Benes reasoned that Netflix games will give people impetus to stick with the service but are unlikely to significantly boost subscriptions.
Loup Ventures manager partner Gene Munster called Netflix's action a "smart move to retain and inch up paid subscriptions" noting there are some two billion gamers worldwide. Wedbush Securities analyst Michael Pachter on Wednesday expected the Netflix move to have "zero" impact on the game world.
"We view the foray into games as an acknowledgement by management that the video content pipeline is flowing more slowly, with content costs continually on the rise," Pachter said in a note to investors. "We also view games as a 'shiny new object' that might distract investors from what we perceive to be Netflix's slowing growth."
Chief product officer Greg Peters said during an earnings call that getting into video games will be a multiyear effort with Netflix starting small in the mobile games arena.
"We really see this as an extension of the core entertainment offering that we've been focused on for the last 20 years," Peters 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."
Netflix executives said they would play to the strengths of shows to create interactive fantasy worlds for fans, and that they are talking with video game makers about licensing deals.
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