Netflix Leverages Fan Enthusiasm to Sidestep Gaming’s Subscriber Acquisition Challenges

Netflix is taking advantage of its subscribers’ strong affinity for many of its films and series to create an audience for its incipient gaming business in an effort to sidestep players in the space’s typical difficulties acquiring consumers.

On a call with analysts Wednesday (Oct. 18) discussing the company’s third quarter fiscal 2023 financial results, Netflix Co-CEO Greg Peters spoke to the opportunity that the category presents.

“We believe that we can build games into a strong content category, leveraging our current core film and series by connecting members, especially members that are fans of specific I.P.s, with games that they will love,” Peters said. “As we make those connections, … we’re essentially sidestepping the biggest issue that the mobile games market has today, which is how do you cost effectively acquire new players.”

Those comments follow on the heels of Netflix’s announcement in August that it was rolling out a limited beta test of games to a select number of members in Canada and the U.K., beginning with two games. On Monday (Oct. 16), the company added that it was expanding this rollout to the United States.

On Wednesday’s call, Peters noted that the streaming giant has its sights set on the “$140 billion worth of consumer spend on games outside of China and outside of Russia.” Additionally, he noted, if the company can build a loyal audience for its games, it has the potential to parlay that success “back into the core business,” driving engagement and retention, creating synergies between the two categories.

Indeed, there is stiff competition for gaming subscribers. Microsoft has been noting growth in its Xbox Game Pass subscription. Nintendo Switch Online reportedly had 36 million paid subscribers as of September last year.

PlayStation parent company Sony, for its part, has stopped disclosing PlayStation Plus subscriber counts as of its last earnings call, with Sony SVP Naomi Matsuoka stating that the decision came amid a shift from focusing on acquisition to premiumization, but at the end of fiscal 2022, it had 47 million subscribers.

Plus, the space is growing more competitive, with Meta having recently launched a new subscription service on games for its virtual reality (VR) headsets, Meta Quest+, and with Google reportedly testing an online gaming product for YouTube.

Certainly, streaming companies such as Netflix and YouTube are challenged to find ways to keep their consumers hooked, especially now, as consumers’ household budgets come under pressure, making many pare back their spending on nice-to-haves. PYMNTS Intelligence’s report “The One-Stop Bill Pay Playbook: Drivers of Consumers’ Bill Payment Priorities,” created in collaboration with Mastercard, which drew from a survey of more than 2,100 U.S. consumers, revealed that, when people cannot afford to pay all their bills, streaming subscriptions are the service that consumers would be the most likely to cancel.

By adding value, diversifying into games, Netflix has the opportunity to keep its subscribers hooked, making it more likely that, if people are going to cancel a streaming service, it will be a competitor.