Netflix video games are coming – and the explanations are very Netflixian

This photo image shows the Netflix logo on the App Store displayed on a smartphone screen.

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For the first time, Netflix executives spoke at length about the company’s ambitions for video games. Her reasons for expanding the company’s product lineup were very … Netflixian.

On the face of it, Netflix will begin offering subscribers mobile games at no additional cost to add value to the service. Subscriber numbers in the US and Canada declined 400,000 in the second quarter, a sign that business is nearing saturation point in the short term. Adding video games can attract new customers while reducing churn.

“The success of this initiative depends largely on great games,” said Greg Peters, Netflix’s chief operating officer and chief product officer, during his company’s second quarter conference call on Tuesday. “We believe we will get through [games]. “

But pull the curtain back, and it’s clear that Netflix selected video games as one of the company’s first major non-video-related businesses because of two themes: data and intellectual property.

These two concepts are at the core of Netflix’s success as a video streaming service. Netflix revolutionized streaming video by using streaming video data to make recommendations on what a person should watch and to guide the production of original content. The value of one’s own intellectual property has led to a global shift in media distribution as companies increasingly cling to their own creations and stream content themselves rather than widely selling programs to others.

The results have seen Netflix dominate the entertainment world with 209 million subscribers worldwide and a range of copycat subscription streaming services from all media companies. They have also resulted in a creative product that some find gauche rather than art-making.

“These streaming services did what they call ‘movies,'” said Barry Diller, who once ran Paramount Pictures and 20th Century Fox, earlier this month. “These are not movies. They are a strange algorithmic process that created things that take about 100 minutes.”

The game strategy of Netflix

Peters acknowledged that the company will “learn and grow and realign our investments based on what we see it works” with games. He found that games offer “intentionality” and allow users to dictate the characters they want to spend time with in different parts of a game world.

This user-based decision-making is not ignored by Netflix. Rather, it will guide Netflix – not just in making better games, but in making creative choices too. If a Netflix-owned series has a character that is heavily used in games, it is easy to imagine that character would be more prominent in an upcoming season of the show.

“Maybe one day we’ll see a game that makes a movie or a series,” said Peters. “That would be a great place to really see the rich interplay of these different forms of entertainment.”

While Peters noted that Netflix will license some games – just as Netflix built its video service based on licensing TV shows and movies – he said Netflix’s intellectual property is a key differentiator from other competitors in the space.

“The first of those [differentiating factors] it’s about the intellectual property we create, ”said Peters. “We know that the fans of our stories want to go deeper and continue to get involved. The great thing about Interactive is that you can provide universes that have plenty of time for people to engage and explore. “

This “significant amount of time” is another important tenet of Netflix – users stay in the company’s ecosystem. This is why Netflix founder and co-CEO Reed Hastings once said that even sleep should be viewed as Netflix competition.

Gaming is not going to become an independent revenue driver anytime soon. Hastings described Netflix as “a one-product company with a number of supporting elements”. But for anyone who was confused as to why Netflix would deviate from its famous focus on streaming, the rationale is clearer today: Hastings hopes what worked for video also works for games.

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