Netflix wants to be a player in gaming. Can it succeed?
In a shadowy cave on a spooky island, a teenager hears strange sounds as she moves the dial on her radio. The frequency opens a dimensional rift — putting her friends in danger.
It’s a scene from “Oxenfree,” a supernatural adventure tale that highlights themes of grief and growing up.
“Oxenfree” is not a TV show or movie — it’s a game that can be played on a mobile phone for hours. And it’s among 35 games available to download for free to subscribers through Netflix’s mobile app. The streaming giant plans to grow that number to roughly 50 by the end of the year.
“Games embody a fusion of creativity and technology, which makes them a natural next step for Netflix, a company that is also balanced between creativity and technology, art and science,” said Mike Verdu, a former Facebook and Electronic Arts executive who was named Netflix’s vice president of games last year. “We want to deliver the best entertainment experiences to our (223 million) members, and that includes great games.”
Netflix’s big push into gaming comes as the Los Gatos, Calif.-based company faces mounting pressure to diversify its business and boost its customer base as rivals such as Disney+ and HBO Max pose more of a competitive threat.
Responding to subscriber declines, Netflix earlier this year laid off hundreds and ended its long-standing resistance to running ads on the platform. Its outlook improved last week with the news that it added 2.4 million subscribers in the last quarter.
Expanding its library beyond movies and TV shows and into gaming could ultimately help Netflix draw more younger consumers — and keep existing ones.
“The more entertainment services that are on a platform, I believe it will make it much more sticky and reduce churn,” said Kevin Westcott, who leads the U.S. technology, media and telecommunications practice of Deloitte.
Since announcing its mobile gaming plans last year, Netflix has quietly scooped up several small-to-mid-level studios, including mobile developers Boss Fight Entertainment of Texas, Finland-based Next Games, as well as local studio Night School, which had a slow-build, multiplatform hit with “Oxenfree.” Netflix republished the game, which was initially released in 2016, this fall with new content and in multiple languages and has another major installment of the brand planned for next year.
Netflix already has a games studio in Finland and is starting another studio in Southern California led by Chacko Sonny, who oversaw production on “God of War: Ascension” and was an executive producer for the “Overwatch” franchise.
And on Tuesday, Verdu revealed at the TechCrunch Disrupt conference in San Francisco that Netflix is “very seriously exploring a cloud-gaming offering so that we can reach members on TVs and on PCs.”
The gaming foray is a natural extension for Netflix, which wants to tap into a vast market — more than 3 billion people around the world play video games — and capitalize on shifts in the market. Many consumers prefer not to pay for mobile games and instead play free ones that are supported by ads, or that charge for additional gameplay or bonus items. That can make more elaborate mobile games difficult to finance. Netflix does not put any in-app ads or purchases in its games.
These mobile games are as eclectic as the streamer‘s regular offerings. Among the most popular titles is an off-road racing game called “Asphalt Xtreme.” There’s “Knittens,” a puzzle challenge where players collect yarn to “knit” outfits for cats. And esoteric fare, such as the critically-acclaimed “Before Your Eyes,” about a deceased boy remembering his life. The game captures the blinking movements of a player’s eyes.
“Games like ours don’t live at the price point that the mobile user base has become accustomed to,” said “Before Your Eyes” game director Oliver Lewin. “We weren’t sure how to address it. Being a part of a subscription service fixes that problem.”
Netflix acquired its first game developer with the purchase of Night School Studio.
Eventually, Netflix hopes to create games based on its original shows such as reality dating series “Too Hot to Handle” or “The Queen’s Gambit.” Netflix already has partnered with companies with popular brands, including “Exploding Kittens,” known for its physical card game.
But the strategy also comes with risk. Many others have tried but failed to establish a foothold in interactive entertainment, most recently tech giant Google, which shuttered its cloud-focused gaming service Stadia because it hadn’t gained enough traction with users.
Walt Disney Co., home to the world’s most well-known intellectual property and a catalog of well-received games such as “Epic Mickey” and “Disney Infinity,” couldn’t crack the game sector on its own and switched to a licensing-focused model for interactive media.
Amazon too has long struggled to get its games division off the ground before finally gaining a bit of traction with last year’s release of “The New World.” There are success stories — Sony, of course, which is home to the blockbuster PlayStation brand, and Warner Bros. Games — but those firms have invested heavily in either hardware, buying established game studios or both.
“Netflix announces games are an art form, and we’re an art creator because we create TV and movie content,” said Michael Pachter, managing director of equity research at Wedbush Securities. “Disney has said that [multiple times] and abandoned their efforts [multiple times]. So it begs the question: If Disney can’t figure it out, how can Netflix figure it out?”
The Los Gatos, Calif.-based streamer added 2.4 million subscribers in the third quarter, beating the company’s and analysts’ estimates.
Netflix has been relatively low-key about its game offerings and some customers aren’t even aware they exist. Mobile app data provider Apptopia estimates that Netflix’s 35 games have been downloaded around 32 million times as of Oct. 12. The failure rate of apps is high — most mobile games never make it to 1million downloads, Apptopia said.
It’s uncertain whether or not the game offerings will bolster subscribers — or keep Netflix’s existing user base from unsubscribing.
Netflix executives acknowledge the challenges, but stress they are committed to the business for the long haul.
“The game business is not an easy one, but if you put players first and make wonderful experiences for them, you’ll be rewarded,” Verdu said.
Night School, the studio founded by cousins Sean Krankel and Adam Hines in Glendale, has seen the struggles of the game industry firsthand.
“Being in the indie space can very much be feast or famine,” says Krankel, a veteran of the now defunct Disney Interactive. “You can launch a game and it can go pretty flat, and then you have to figure out if we move rapidly into the next game or revise and fix the game that we did.”
But Netflix, Krankel says, has supported the expansion of the studio — which has doubled the number of employees to nearly 40 — and its “Oxenfree” franchise that is now available in more than 30 languages and 100 territories. A sequel is planned for next year.
“Even though it is a science-fiction, mind-bending, supernatural adventure, the core of it is a coming-of-age story that ideally anybody can relate to,” Krankel said. “And that’s why I think being able to have it in all these other languages will let us know if it is a story that resonates around the world.”
“Being a part of Netflix, it has been extremely relieving because we don’t have specific dates that we necessarily have to hit,” Krankel says.
While roughly a year old, Netflix’s game content is winning critical acclaim, especially from those who pay attention to adventurous, indie-oriented games such as “Before Your Eyes” or “Poinpy,” a cartoonish game that ricochets from riotous bouncing to demanding puzzles. Coming soon to the platform is “Immortality,” a game that argues we’re just at the beginning of exploring the possibilities of interactive cinema.
“It’s cool that Netflix is making some tasteful choices with the games they’re bringing to mobile,” said Graham Parkes, writer/creative director of “Before Your Eyes,” developed by Los Angeles-based studio GoodbyeWorld Games.
This is the first time that Netflix is launching a game and adapting it into a TV show.
Netflix so far is also willing to bet on more risky, niche-focused titles such as “This is a True Story,” an Africa-themed, richly drawn, easy-to-play game in which players are tasked with managing a character’s energy resources.
Frosty Pop founder Faisal Sethi says the game, that seeks to bring awareness to the global water crisis, was a passion project fully supported by Netflix.
“If you think from a high level down, you can see the correlation between story, art, data and traditional content,” he says. “It’s a transmedia play.”
As Netflix grapples with a loss in subscribers, the company’s vaunted “team” culture is coming under strain as some employees worry about their future.
London-based Ustwo Games brought its “Desta” title to Netflix. It’s an unique strategy game about conquering past trauma and struggles through strategic bouts of a dodgeball-like challenges.
“Netflix aren’t shouting everything from the rooftops, as they’re trying to steadily build a platform,” said Daniel Gray, Ustwo’s chief creative officer. “But when there’s 200 million-plus Netflix subscribers, we only have to convert a small percentage of those players into playing ‘Desta’ and we’ve reached a lot of people.”
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