Despite its reputation as the king of subscription streaming video, Netflix understands that it has never had the dominance over mobile devices that it has on TV screens.
When a subscriber drops onto the couch and opens the Netflix app on their TV, they’re greeted with a range of content the service thinks they want to binge on. On mobile, when a user only has 30 seconds or a minute or two to check their phone, a 2 hour movie is just not the right recommendation.
So the company seeks to change that narrative.
“As we improve our service, our goal is to continue to increase our share of screen time in the US and globally,” the company wrote in its second quarter earnings report.
Screen time, not television time.
Sure, people watch Netflix shows and movies on their phones, but as the company noted in its results letter, “we think our engagement share is even lower” on mobile than on screens. television, and according to Nielsen, Netflix accounts for just 7 percent of television viewing. This is why Netflix says it competes with YouTube, TikTok, and Fortnite more than HBO and Disney +. Usage time isn’t endless, they can only watch one screen at a time, and Netflix wants to gobble up as much time as possible.
And so, Netflix will enter the gaming space, “mostly focused” on mobile devices initially.
“We believe mobile is a great platform for gaming,” Netflix product manager Greg Peters said during the company’s earnings call. “Clearly he’s very mature, he has great enabling technology, great tools, great developer community. And the vast majority of our members have phones capable of a great gaming experience, which sort of checks all of those boxes. “
When seen alongside its continued push in the original podcasts and the recent launch of “Fast Laughs,” which combines the addicting TikTok mobile video format with snippets from Netflix’s comedy specials, things start to get clearer.
When a subscriber opens their Netflix app on their iPhone, the company wants to give them a menu of mobile-first content options that rivals the movies and TV shows they highlight on the TV glass.
Mobile is inherently a different beast from television. Dominated by TikTok, Instagram, Spotify, Snap, Twitter, and gaming apps, it’s not beholden to a single format, with games, podcasts, text, and videos all sharing screen space.
To put it another way, Netflix is betting that Quibi’s basic underlying philosophy was both right and totally wrong: Subscribers want and need different types of content when they’re on a train, lining up at the store. or sitting in a doctor’s waiting room. .
But just shortening premium content isn’t enough to feed this itch, mobile market share requires more than shorter videos, it needs to have a holistic mobile-focused mindset.
“The reason we’re doing them is to help the subscription service grow and be more important in people’s lives,” co-CEO Reed Hastings said on the earnings call. “So I would say, really, we’re a one-product company with a bunch of supporting elements that help this product deliver incredible satisfaction to consumers and a monetization engine for investors.”
In other words, a new mobile experience, driven by games, could be the ideal solution to maintain the growth of Netflix in markets like North America where its subscription levels are almost saturated, and to make service. even better value for its users.
Games could also give Netflix an option, offering a cheaper “base tier” without games, or a more premium offering down the line. Just as Netflix offers mobile-only levels in some countries, games and other formats could extend this experimentation further.
“We see Netflix’s approach to gaming as a potential long-term revenue generator, especially in mature markets,” wrote Michael Morris of Guggenheim. “We also believe this strategy supports Netflix’s content wheel and ultimately diversifies revenue streams. “
But in the near future, Hastings said Netflix doesn’t expect to rely on games or any of its other mobile offerings to make money. “They alone do not constitute a profit pool of any size,” Hastings said on the call for the results.
Netflix’s ambitions are more modest than rivals Google, Apple and Microsoft, which have all launched heavily funded and well-stocked mobile game subscription offerings.
But Netflix also has the benefit of being a beloved brand, a place where users expect to see content that is relevant to them and being home to a popular IP like Bridgerton, Strange things, and The Queen’s Gambit. And the app doesn’t have any ads or add-ons, both of which are common in the gaming space but annoy users.
“This could prove to be attractive to developers as well as to consumers,” wrote Tim Nollen of Macquarie Research after the results were announced. The company agrees.
“We find that a lot of game developers really like this concept and this focus and this idea of being able to put all of their creative energy into just great gameplay and not having to worry about other considerations that they usually had to arbitrate. by just creating compelling games, ”said Peters.
Netflix’s gaming ambitions are long overdue, with Hastings saying that “we’ve been talking about video games for several years, writing down the pros and cons of the time of entry.”
Ultimately, “we thought the extra money to fund games made sense compared to our other content investments,” he added.
But it’s also a major risk for Netflix, which for years has been a Wall Street darling thanks to its insatiable growth. Games are expensive and complex, and there are still real questions about how he plans to deliver these games to consumers (do they need to be streamed or do they require downloads?)
Morningstar analyst Neil Macker wrote that the effort is a “distraction at best,” while Wedbush’s Michael Pachter wrote that “the business graveyard is littered with the corpses of content companies that have failed to make games. mobiles, with Disney the biggest failure. Even video game publishers like Activision, EA, Take-Two, Ubisoft, and Nintendo have tried for years to create compelling mobile content, and each has only seen lasting success through acquisition.
Of course, an acquisition wouldn’t be out of the question for Netflix. Even though the company says it “doesn’t consider any asset to be ‘must-have’ and we haven’t yet found any on a large scale compelling enough to act,” a whole new area of content like gaming could open the door to acquiring a small studio or other gaming-focused tech company… provided the company’s money isn’t better spent elsewhere.