Netflix's plan to take on Game Pass isn't as dumb as you think, experts say

Netflix is venturing into bold new territory.

On July 15, the streaming giant announced plans to feature video games alongside its regular offerings, a move that could result in a significant revenue boost for the company. But big tech’s attempts to muscle into the gaming space in recent years have resulted in a lot of costly failures, like Amazon Game Studios and Google Stadia.

However, George Jijiashvili, Principal Analyst at Omdia, says the movie and TV streaming titan is unlikely to repeat the missteps of its big-tech contemporaries.

“Netflix will enter gaming cautiously, having learned from Amazon’s and Google’s mistakes,” Jijiashvili tells Inverse.

Netflix also won’t use its new video game streaming model to raise prices in the near future, Bloomberg reported hours after the announcement. Instead, the new initiative could serve as a way to cross-promote Netflix’s original programming and encourage members to spend more time on the platform.

To get a better sense of what this could mean for the video game industry as a whole, Inverse spoke with Jijiashvili, Newzoo Senior Market Analyst Jordan Fragen, and Joost van Dreunen, the author of One Up and lecturer on the business of video games at the New York University Stern School of Business. They shared their insights about the types of games Netflix is likely to make and how it may compare to more established competitors like Microsoft and Sony.

July 26, 2021 Update: Following this report, Netflix confirmed it will be developing smaller games for mobile devices, at no additional cost for the time being. This is in line with the analysts’ predictions. As reported by The Verge, Netflix said “games will be included in members’ Netflix subscription at no additional cost similar to films and series.” The company also noted that it would “be primarily focused on games for mobile devices.”

A new challenger

Is Netflix looking to directly challenge the likes of Microsoft and Sony by adding a robust library of games to its platform? The analysts we spoke to don’t think it’s too likely. Jijiashvili believes Netflix’s games will serve as a complementary experience.

“Netflix will not seek to compete with Xbox and PlayStation directly with its gaming service,” Jijiashvili says. “I believe that the games will live within the Netflix app, with the primary purpose of providing a complementary experience for increasing engagement and [to] keep people on Netflix for longer.”

In this case, “complementary” likely refers to a game on a much smaller scale than titles from big-budget franchises like Call of Duty or Halo. You likely won’t play Netflix games instead of the next big Assassin’s Creed. You’ll play them in addition to those blockbuster titles.

Van Dreunen agrees, arguing that Netflix’s early ambitions in the space will likely be more modest than Amazon or Google.

“Microsoft Game Pass and xCloud are proof points that a sustainable market for subscription-based content services now exists in gaming,” van Dreunen tells Inverse. “Netflix, however, lacks the experience and expertise currently to differentiate itself. I expect them to initially roll out an add-on gaming service, similar to Apple Arcade, which will subsequently be rolled into the standard subscription.”

Depending on how successful this endeavor is, we could eventually see Netflix start working on larger-scale games you’d get on a console, but don’t expect that to happen right away. Xbox head Phil Spencer probably won’t be losing sleep about a threat to Game Pass anytime soon.

Netflix’s advantages

Netflix benefits from being an instantly recognizable brand, with a massive install base of 208 million worldwide users as of Q1 2021.

“While Microsoft has a first-mover advantage with Xbox Cloud Gaming and a strong library of games via Game Pass, Netflix’s strength is that they already have many more users logging into their platform every day,” Newzoo’s Jordan Fragen tells Inverse.

Netflix will likely focus on smaller projects pinned to its existing IP, but it doesn’t need a massive AAA project to draw a crowd. That’s because the crowd is already there.

Despite the poor track record for big tech companies delving into making games, experts agree the future for Netflix looks bright.

“In contrast to tech giants trying to break into the gaming space, Netflix is primarily a media company with a strong and long-standing relationship with its subscribers — arguably, Netflix is in a much better position and its gaming service should therefore be better received,” Jijiashvili says.

Keep it casual

If Netflix plays its cards right, it could attract an even wider audience with interactive experiences that appeal to fans of its original movies and TV shows like Stranger Things or Lupin, Fragen and Jijiashvili say.

“If Netflix goes the interactive experience route, [it] could create widespread demand for a new type of content that might attract interest, even from non-gaming Netflix users,” Fragen says.

Not everyone is interested in complicated games, so what better way to attract a wide audience than to lure consumers in with interactive experiences instead?

“I envisage Netflix first experimenting with simple, family-friendly, HTML5 multiplayer games and interactive experiences along the lines of Bandersnatch, with a TV remote or smartphone serving as a controller,” Jijiashvili says.

Varying internet speeds are another major issue for video game streaming — and one Netflix is already familiar with through its TV and movie business. It’s unlikely Netflix will be able to stream complex games without any noticeable lag, at least initially, which is why we’ll likely see smaller experiences instead. Streaming something like Black Mirror: Bandersnatch — a “choose your own adventure” experience that debuted on Netflix in 2018 — is more viable than a shooter that requires pinpoint precision.

“It’s unlikely that Netflix’s interactive experience design will be reliant on fast-paced, precision-based, multiplayer titles where a fast internet connection is crucial,” Fragen tells Inverse. “It would be surprising if Netflix chooses to develop traditional games in-house, as it would be the path of most resistance for them. Creating a game studio from scratch is extremely difficult and time-consuming.”

Room to adapt

Netflix original series like The Witcher, Castlevania, and the upcoming League of Legends are all cross-medium examples that can be used to introduce non-gamers to gaming IP. This is a proven tactic. Following the release of The Witcher Netflix show in December 2019, sales for Witcher 3: The Wild Hunt (a video game) grew by 554 percent year-over-year during the same month.

Sony is taking the same approach with its upcoming Uncharted film, along with The Last of Us and Twisted Metal shows, using cinematic adaptations to boost the popularity of the original game. This will likely lead to more video game sales, while also taking advantage of a built-in audience for those movies and shows.

“Netflix’s IP could do well: imagining a board game based on Stranger Things and following it up with an RPG-style title makes sense,” van Dreunen says. “But rather than issuing first-party ports of existing IP, Netflix needs to think harder and take more risk to stand out.”