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Netflix hopes to develop and sell video games but it’s a very risky business venture. Photo: Getty Images

Netflix to enter video game business by adapting hit shows like Stranger Things; critics doubt it will pay off

  • Having strong intellectual property and deep pockets is no guarantee of success at developing games. Disney failed three times before turning to game makers
  • Moreover, Amazon, Google and Facebook have poured hundreds of millions of US dollars into gaming in the past decade without becoming big players
Video gaming

With over 200 million paid subscribers worldwide, Netflix is an absolute behemoth.

The streaming entertainment giant has successfully transitioned from a scrappy start-up paying to license its content to a major player in Hollywood, splashing out tens of millions of dollars on its own productions.

So what’s next for Netflix? The answer to that question, at least in part, appears to be video games. Netflix is fishing around for a gaming executive to help it expand out its gaming initiative, according to a recent report in The Information. While the company has acknowledged an interest in interactive entertainment, it has yet to decide what this will mean in practice. Licensing content from existing game makers? Making its own games? And how will you actually play those games?

While we still don’t know much about Netflix’s plans, one thing is clear right now: Netflix getting involved in gaming is almost certain to fail.

Netflix co-founder and CEO Reed Hastings (left) and Netflix chief content officer Ted Sarandos are moving the company into the video game business. Photo: Getty Images

“I do think they will try, and do think they will fail,” says Wedbush managing director Michael Pachter. “It’s hard to make games.” Indeed, the video game industry is a very risky business, and even entrenched studios with top-tier talent and years of experience regularly go under.

“We have the failures of THQ, Midway, Acclaim, 3DO, BAM, Eidos, Atari, Infogrames, Interplay, and probably a few others to illustrate how hard it is,” Pachter says. “I don’t see how Netflix could possibly think it can develop and sell games.”

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Joost van Dreunen, author of One Up: Creativity, Competition, and the Global Business of Video Games, echoes Pachter’s scepticism. “Big tech sucks at games,” he says. He points to Google's Stadia, Amazon's Luna, and Facebook's scattershot gaming efforts in the past 10 years as prime examples of how major tech companies routinely fail at gaming initiatives.

Google, Amazon and Facebook poured hundreds of millions of dollars into gaming in that period, yet none are major players in the video game market. “They look at it in a way that distribution goes before the content,” says Van Dreunen, “and that’s the wrong way around.”

Instead of creating video games and building beloved brands, they’ve largely focused on the mechanics of how you buy and access those games: Google's Stadia platform, a Netflix-like video-game streaming service, is a prime example.

Building games from owned IP is also super hard. Disney has failed at least three times trying to do so, and its IP is much stronger than Netflix
Michael Pachter, Wedbush managing director

Less than two years after Google announced a major game development initiative led by Assassin's Creed creator Jade Raymond, and less than one year after outright buying a video game studio, the company folded those efforts this past February. 

An “increased focus on using our technology platform for industry partners”, Google Stadia vice-president Phil Harrison said in a blog post – a pretty huge step back from the splashy announcement of Stadia back in 2019, which promised a new digital service that would compete against the likes of Nintendo, Sony’s PlayStation, and Microsoft’s Xbox.

For Netflix, which has the benefit of owning a beloved intellectual property like Stranger Things that could lend itself to games, another problem exists.

“Building games from owned IP is also super hard,” Pachter says. “Disney has failed at least three times trying to do so, and its IP is much stronger than Netflix.”

Netflix owns the intellectual property of hit shows like Stranger Things that could lend itself to a video game. Photo: Getty Images

In recent years, Disney’s biggest properties – from Marvel characters to the Star Wars franchise – have found success in gaming by Disney largely handing over creative control to major video game companies. 

Examples include 2018’s Marvel's Spider-Man and 2019’s Star Wars Jedi: Fallen Order. The former, a PlayStation 4 exclusive game made by Insomniac Games, sold over 20 million copies. The latter, a multi-platform Star Wars game with original characters and story, sold more than 10 million copies. At around US$60 apiece, each game has grossed well over US$1 billion in sales.

Netflix could build a wildly successful game streaming service that seamlessly leverages its existing streaming service. It could spend years, and hundreds of millions of dollars, building its IP into major game franchises.

Or it could buy its way in, splashing out billions of dollars on a major game publisher like EA or Ubisoft – akin to Amazon's recent purchase of MGM Studios, but for gaming. That would require a major, long-term institutional buy-in from Netflix, in addition to major financial investments.

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“You need to have the stomach,” Van Dreunen says. “Like when you look at Google and Amazon – they just don't have internally the numbers or the understanding of the space to say, ‘Yeah, you know what we should do? Spend US$10 billion to really break in.’”

For its part, Netflix has not detailed its gaming plans just yet – but the company is acknowledging the reported interest in a larger gaming investment in the future.

“Our members value the variety and quality of our content,” the company said. “Members also enjoy engaging more directly with stories they love – through interactive shows like Bandersnatch and You v. Wild, or games based on Stranger Things, [Money Heist] and To All the Boys. So we’re excited to do more with interactive entertainment.”