In recent months, Netflix (NASDAQ:NFLX) executives have engaged in discussions, as reported by the Wall Street Journal, contemplating ways to generate revenue from their video game offerings. Presently, Netflix games are complimentary for all subscribers, serving as a strategic move to retain users during periods of show hiatus or between seasons.
This potential shift toward pay-to-play video games marks a departure from Netflix’s existing strategy. Insights from individuals familiar with the discussions reveal various ideas under consideration, such as introducing in-app purchases, pricing adjustments for sophisticated games in development, or providing subscribers on the ad-supported tier with access to games featuring advertisements. Notably, Netflix has historically refrained from incorporating ads or in-app purchases into its gaming platform.
These ongoing discussions within Netflix’s leadership signal a potential change in strategy as the company explores avenues to monetize its video games. Earlier statements from Netflix Co-CEO Peters in April emphasized a commitment to offering a distinct gaming experience, allowing game creators to focus on player enjoyment without concerns about alternative monetization methods like ads or in-game payments.
Netflix’s venture into the gaming industry is a long-term strategy that commenced in 2021 with the introduction of mobile games available for free download to subscribers. Additionally, the company has secured licensing agreements for popular games, such as “Grand Theft Auto: San Andreas,” which accounted for 11% of Netflix’s game downloads in 2023. Although the number of users downloading Netflix games is increasing, it remains a modest proportion. According to Sensor Tower, global downloads of Netflix games reached 81.2 million in 2023, nearly three times the 28.7 million downloads recorded in 2022. Nevertheless, daily engagement with Netflix games is still limited, with fewer than 1% of the platform’s global subscribers playing games daily as of October, according to Apptopia.
In recent years, Netflix has acquired several small gaming studios and shifted focus towards creating games based on its original shows and movies. Developing a video game can entail significant costs, often reaching hundreds of millions of dollars. This financial consideration has prompted discussions within Netflix about the potential implementation of charges for game access. Analysts estimate that Netflix has invested approximately $1 billion in acquiring gaming studios and building the gaming business, a figure significantly lower than the $17 billion annual expenditure on shows and movies. Despite these efforts, some analysts, including Capital Group, a major Netflix stakeholder, have expressed skepticism about the value of Netflix’s expansion into the gaming sector, raising concerns about resource allocation away from core programming endeavors.
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Author Stephanie Bédard-Châteauneuf 
