Netflix makes a play for the gaming industry

4 days ago

Image: © Praneat/Stock.adobe.com

The announcement came alongside the company’s Q2 earnings, where it reported a rise in revenue and subscriber numbers.

Streaming giant Netflix has confirmed it plans to expand into the area of gaming, after much speculation.

In a letter to shareholders announcing its second-quarter earnings, the company said it would be undertaking the diversification, “building on our earlier efforts around interactivity (eg Black Mirror Bandersnatch) and our Stranger Things games”.

It said it views the move into a “new content category” as similar to its expansion into original films, animation and unscripted TV.

Netflix plans to include games in its existing subscriber packages at no additional cost. The company’s initial focus will be on mobile gaming.

Though this announcement is the first time the company has publicly confirmed a move into the area of games, The Information reported in May that Netflix had been seeking an executive to oversee these efforts. Last week, the company said it hired Mike Verdu, formerly of EA and Oculus, to serve as its vice-president of game development.

As competition intensifies in this market, many streaming services are seeking new ways to connect with customers. This week, HBO Max announced it would be offering free episodes in the Snapchat app which users will be able to view with friends.

Netflix’s gaming news came alongside the release of its Q2 earnings. The company’s revenue in the quarter was $7.34bn, just beating analyst predictions of $7.32bn, and representing 19pc year-on-year growth. Its earnings-per-share slightly underperformed, at $2.97 versus an expected $3.15.

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However, the company soundly beat Wall Street expectations on subscriber growth, adding 1.5m customers during the quarter. Its year-on-year growth in total memberships, which currently stands at 209m, was 8.4pc. This is good news for the company after a disappointing Q1 for subscriber growth.

The shareholder letter acknowledged that the pandemic created unusual patterns of growth, with huge spikes in subscription numbers early in 2020.

“Covid has created some lumpiness in our membership growth (higher growth in 2020, slower growth this year), which is working its way through,” it said. “We continue to focus on improving our service for our members and bringing them the best stories from around the world.”

Netflix had a strong 2020 overall, announcing at the start of this year that it would no longer need to source external financing to create original content, and that it would undertake its first share buyback in a decade. Details of the $5bn buyback scheme were released in April.

The shareholder letter also cast an optimistic eye to the future: “Our belief is that as we steadily improve our service to better please our members, this will lead to continued growth in our membership base, ARM [average revenue per membership], revenue, operating margin and profit dollars.”

It also noted that despite the streaming revolution of recent years, “we are still very much in the early days of the transition from linear to on-demand consumption of entertainment”.

“Streaming represents just 27pc of US TV screen time, compared with 63pc for linear television, according to Nielsen,” it said. “We are confident that we have a long runway for growth.”

Jack Kennedy is a freelance journalist based in Dublin

editorial@siliconrepublic.com