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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Netflix Keeps Pushing Into Games

Netflix Games is going to market

Netflix’s Game Strategy Rolls Out

Earlier this week, Netflix released the first batch of mobile games to its existing subscriber base for no additional charge (The Verge). The games are currently limited to Android phones, with a push into iOS coming soon. While the initial five game line-up isn’t particularly interesting, the speed at which Netflix has pursued its gaming strategy is noteworthy. Consider the high-level timeline below:

- October 2017 - Stranger Things: 1984 comes to mobile devices following the success of the TV series.

- December 2018 - Release of Black Mirror: Bandersnatch, an interactive film that enabled users to determine the path of the show.

- July 2019 - Stranger Things 3: The Game launches on PC, consoles, and mobile devices.

- October 2019 - The 3% Challenge, a voice controlled game, launches as a prequel to a Netflix original series.

- July 2021 - Netflix hires Mike Verdu, former Oculus and EA game development leader, as Vice President of Game Development.

- August 2021 - Netflix begins testing its mobile games through subscribers in Poland.

- September 2021 - Netflix acquires Night School Studio, creator of narrative-driven titles like Oxenfree.

- November 2021 - Initial set of games (Stranger Things: 1984, Stranger Things 3: The Game, Shooting Hoops, Card Blast, and Teeter Up) are launched on Android globally.

Games aren’t as new to Netflix as we may think, but the quick succession of the last four bullets above demonstrates how the company is doubling down and taking this segment more seriously.

We’ve previously written about Netflix’s potential strategy in gaming just over 6 months ago after their COO mentioned on an earnings call that they view games as an interesting way to deepen the connection between fans and content (Konvoy). The four ways we predicted Netflix could enter games included leveraging IP, creating a game distribution platform, integrating cloud gaming, and potentially acquiring Discord. While the acquisition of Discord seems highly unlikely given its apparent path to IPO after ending discussions with Microsoft, the other three bullets are still extremely relevant to the future.


Leveraging IP

Although the initial game offering is split between Netflix IP and more generic hyper-casual game offerings, the acquisition of Night School Studio (some previous titles include Oxenfree, Mr. Robot, Afterparty) demonstrates the commitment to creating narrative-based games that are rooted in characters and storylines that fans already know and love. This isn’t necessarily a surprise considering the extensive library of IP that Netflix has built out. Given the release structure enables (and even encourages) binge watching, games are an incredibly powerful way to keep users engaged during long gaps between seasons.

One thing that will be interesting to track moving forward is Netflix’s broader content strategy and how the introduction of games could affect it. Stranger Things is a very logical IP to start with given the popularity of the story and the wide range of demographics it caters to. After all, the goal of the game platform is to create content “for any level of play and every kind of player” (Netflix). This represents Netflix taking its existing one-way media content and wrapping it into a game (two-way media).

However, if the games division is truly a core component of the broader media strategy, we may see the future of Netflix’s traditional offering being shaped by quality game content (think Angry Birds). This will likely be determined by whether active (games) or passive (TV and movies) engagement is a more effective way to introduce compelling IP, capture a user’s attention and keep them interested in the long run.


Game Distribution

The current slate of games are currently available within the Netflix app on Android devices through a dedicated games row and tab that presents the game titles alongside existing content. While each game is also available independently through the Google Play Store (Apple App Store coming later), this ensures the games are directly marketed and easily accessible to all Netflix users.

As the pipeline of game content continues to expand, it wouldn’t be surprising to see Netflix create their own independent game distribution platform / launcher. The slow but steady loosening of mobile hardware producers’ control of app distribution could eventually enable them to become their own app marketplace across mobile platforms. While the current game portfolio doesn’t warrant a separate subscription, a sufficient pool of high quality content could.


Cloud Gaming

In 2019, Reed Hastings famously stated that Fortnite was a bigger threat to Netflix than HBO (TechCrunch). After all, Netflix’s business is all about winning the consumer’s free time. In a world with seemingly infinite entertainment options, delivering game content to users on any device and at any time could be a key differentiator to expand their coveted share of a subscriber’s mind share.

Netflix is uniquely positioned to make this a reality through its well-established Content Delivery Network (CDN) called Open Connect (Netflix). The existing localization of networking traffic could be a critical advantage to mitigating latency and input lag, which are two critical limitations on cloud gaming’s success to date. A growing library of more intricate and hardware-demanding games could warrant a new way to facilitate the user experience.

Takeaway: Netflix is still early in its pursuit of creating and distributing game content, but it’s clear that it is making a significant push into the space. With a treasure trove of IP to leverage and a newly acquired studio that has the capability to convert it into engaging game experiences, Netflix is well-positioned to execute. The main thing to look out for is whether Netflix intends to incorporate games as a complementary (and complimentary) offering to its traditional TV and movie content, or if this truly becomes a new division that warrants a separate platform and subscription.