Netflix Immersed in Gaming, Two Things They Are Currently Focused On [Next.Jjin]

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Netflix has become obsessed with gaming. Starting from video and DVD rental business in 1997, Netflix is now growing its gaming business alongside being the world's largest streaming service. Since launching its first mobile video game last November, it has released more than 10 games to date. The response? Well, since it is still in the early stages, the general consensus is that there are many areas that need improvement.

Acquiring Companies and Recruiting Talent... Accelerating Business Expansion

Netflix's determination to expand its gaming business is remarkable. These days, Netflix is most focused on acquiring game companies. To grow the business quickly, it is faster to absorb existing companies that have already established themselves, along with their personnel and intellectual property (IP), rather than building everything from scratch. From Netflix's perspective, with strong capital and the streaming service growth slowing somewhat, it is urgent to rapidly expand the gaming business as a new growth engine.

Logos of Night School Studio, Next Games, and Boss Fight Entertainment acquired by Netflix

In the past six months, Netflix has acquired three game companies. In September last year, it acquired game developer Night School Studio; earlier this month, Next Games; and on the 24th, Boss Fight Entertainment. Although the deal sizes are small compared to Microsoft's massive acquisition of Activision Blizzard, Netflix is showing its determination to create its own gaming content by steadily acquiring quality companies.

The common feature is that these companies mainly develop story-driven games. When Netflix acquired Night School, it said it was "strongly impressed by the vision to set a new standard for storytelling in games." Since Netflix produces content like Squid Game, it is expected that games based on such stories will play a major role in attracting gamers.

Securing talent is also one of Netflix's key focuses. In July last year, Netflix hired Mike Verdu, former Vice President of Augmented Reality (AR) and Virtual Reality (VR) content at Facebook, as Vice President of Game Development. Verdu is a gaming expert with experience at Electronic Arts and Kabam. Then in November, Netflix appointed Amir Rahimi, former head of mobile games at Scopely, as Vice President of Game Studios. Recently, Roberto Barrera, who spent 11 years at PlayStation, was recruited for game strategy. Netflix is truly gathering gaming veterans.

Additionally, Netflix is actively recruiting operational staff through job postings. It plans to develop various types of games, not only mobile video games but also console and PC games, and is looking to hire engineers, producers, designers, scripters, and animators. Business Insider reported that "Netflix's full-time employees increased by 20% last year due to expansion into areas like video games," and expects significant growth in personnel this year as well.

Streaming is Outdated? For the MZ Generation, Gaming is the Trend

Why is Netflix so committed to gaming? The answer can be found in a statement made by Reed Hastings, Netflix co-CEO, in January 2019: "Netflix is competing with Epic Games' Fortnite." He identified a third-person shooter game with over 200 million users worldwide as Netflix's competitor, not other streaming services like Disney+. This shows that the competition is not just within the streaming market but about capturing users' leisure time. If so, Netflix sees the need to either check the gaming industry, which threatens streaming, or directly enter it.

According to a recent digital media trend survey by consulting firm Deloitte, the proportion of MZ generation spending leisure time playing games rather than watching TV shows or movies has significantly increased. According to Axios, based on surveys in the US, UK, Germany, Brazil, and Japan, 24% of Generation Z consumers (born mid-1990s to early 2000s) chose video games as their top entertainment activity. The proportion who watch TV shows or movies at home was 16%, lagging behind. For those aged 50 to 70, about 40% still cited watching TV shows or movies as their main leisure activity, indicating a generational gap.

Deloitte analyzed that "streaming services face greater pressure to attract and retain subscribers who are more sensitive to subscriptions and costs, and face the challenge of attracting younger generations who grew up with smartphones, social media, and video games." They emphasized the need to pay attention to the growth of games as a means of social connection. Deloitte stated, "Games allow people to be part of a story, offer autonomy and opportunities for victory, share rich experiences, and fulfill emotional needs."

Do you understand Netflix's reasoning for expanding into gaming as it faces limits in expanding streaming membership? Judging that streaming alone is difficult to foresee the future, Netflix is expanding its business in the globally capital-rich gaming market. It will be interesting to see how far and how Netflix can expand its business.

Editor's Note[Next.Jjin] means 'looking ahead to the real next of business' and is a section delivering overseas news related to future businesses such as metaverse, artificial intelligence (AI), robots, and startups of major companies. We will uncover and explain both major visible issues and small but important hidden issues in an easy-to-understand way.