I was working on article about the rumoured ViacomCBS/NBCUniversal streaming service partnership, but Netflix released their financials on Tuesday and it was a very curious report. The two biggest news items are that they’re planning to go into the video game business and that they’re actually losing customers (in North America) instead of growing. Getting into gaming is a gamble that may not pay off for them and may result in them losing more than they’ll gain.
It’s been a while since I wrote about video games. Around the late 2000s, the most popular content on the website was the video game analysis and podcasts that I was doing (even though majority of what I was doing related to movies). However, much has changed since then. The major players in the game industry are the same (although there has been some corporate consolidation) but the biggest shift has been the number of games that are available. In 2008, I would be able to list all the new games coming out that given week. Aside from the holiday season, it was rare that more than two dozen games would release in any given week across all platforms. Now, there are weeks where each platform sees well over a dozen releases. It used to be possible (if you wanted to, not for me) to play everything that came out. Now, there’s absolutely no way.
In some ways, that’s a good thing as it shows that you don’t need to be a major studio to release games. Although many new games don’t make money (or rely on funding grants), there is always something for everyone to play. It used to be that you’d have to wait for a specific type of game to come out. Now, unless you’re looking for a specific sports game, you can get your hands on a new game in your favourite genre on a weekly basis.
Netflix is hoping to get in growing catalog of games that are out there. They haven’t formally announced their plans, other than they’re looking at getting into the business of streaming games (starting with mobile games). They’re betting that people are willing to pay a monthly fee for games instead of buying them outright.
However, the advantage that Netflix had with streaming movies and television is not there with video games. They aren’t the first company on the block to offer this service. Netflix was able to grow because it was the first one to stream movies and television before other major players got involved (yes, there was also Hulu and Crackle, but their libraries paled in comparison to what Netflix offered and still offers). For games, Netflix is joining a crowded field. On the console side, Microsoft’s Xbox Game Pass is an extremely popular service that allows gamers to download and play (or stream) hundreds of titles on Xbox consoles, PCs, and other devices. To support their service, Microsoft makes their first-party games available on the service on day one. Sony has their PlayStation Now service which allows streaming of games from their back catalog. On the mobile side, both Apple and Google offer subscription services which give access to dozens of games and apps. Google also has Stadia for computers, tablets, and cell phones, but that was a failure for the start.
Netflix is getting into an already crowded field and considering that Microsoft has a deal in place with Electronic Arts and just bought Bethesda, it’ll be hard for Netflix to attract major publishers to their service. Sony might be willing to play ball, but Nintendo and Microsoft won’t. If Netflix could somehow manage to convince 2K or Ubisoft to be part of their service, they may be able to make it viable, but otherwise they’ll have to be content with a bunch of indie titles that many already don’t play because they’re playing something else.
Which brings us to the decline in Netflix subscriptions because it is related to why their run at video games may be unsuccessful. Many will point towards the price increases over the last few years as a reason why they’ve dropped Netflix (the subscription price for the same service has increased 50% over the last eleven years). That is a factor that needs to be considered, but the bigger issue is that the amount of non-Netflix content has dropped over the last years. In its early days, Netflix was home to many top movies and television shows. This was because there wasn’t much competition in the streaming space and media companies were happy to get something for their content. However, over time, more players got into the streaming game and content owners started raising their wholesale prices for their properties. Netflix countered with original content, which people do enjoy, but Stranger Things isn’t Friends or The Office. Even many years after they went off air, they’re still the shows that command the most money.
That’s not to say that Netflix is completely vulnerable. Even after losing The Office (in the United States; it is still available on their platform in Canada), which is their most streamed show, they paid big bucks for Seinfeld (which is available on Crave in Canada). However, the availability of big-name content like Seinfeld are becoming rarer as media companies are starting to hoard their libraries instead of selling them competitors like Netflix.
Simply put, Netflix is losing people because they’re paying more for less. If they decide to add games to the mix, they better create another tier that will allow people who don’t care about games (or are fine with how they already get access to their games). Otherwise, if they further raise prices as content deals cost Netflix money and they’ll have to pass on those costs to the customer. People will continue to see Netflix as less value since they’re paying more for less content than they’ve had in the past, which is not true since Netflix offers more content than ever; what they lose is bolstered by original content. It used to be a one stop shop and now it’s one of many streaming services that need to compliment each other to get everything). Getting access to games that may not be as good as their competitors may not entice many people. Will adding games to their repertoire actually gain customers? Will it stop the erosion?
On a side note. It’s funny that even though people do complain about Netflix getting more expensive, it still offers a better deal than anyone who watched TV in the 80s or 90s could ever imagine. Linear television is limiting and the current television landscape is barren. My television package might have 100+ channels, but they’re all repeats of each other’s programming (remember when Bravo and Showcase had interesting programming instead of reruns of network series). Yet even though cable bills can sometimes go well over $100, when Netflix raises their price to $14.99 there’s public revolt; I just don’t get it. As consumers, we are in a golden age of (legal) content availability. For what it’s worth, I think Netflix is an incredible value and I consider myself lucky to be able to get so much for so little (compared to cable). Maybe we’re only a few years away from returning to only a few major streaming companies. Tomorrow, I’ll have an article about alluding to that possibility with the potential of a partnership between Peacock and Paramount+.
Disclosure: I own stock in several media companies. For more information, please refer to my disclosure page.