Netflix Wants to Play in the Gaming Industry – Tech News Briefing

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Zoe Thomas: This is your Tech News Briefing for Friday, July 23rd. I’m Zoe Thomas for the Wall Street Journal. The home of Bridgerton, Stranger Things, and The Queen’s Gambit wants to offer subscribers something new, games. After years of dominating streaming, Netflix is looking at ways to enter the gaming industry. But if it thought the streaming wars were getting fierce, it may find the gaming industry even more competitive. On today’s episode our tech reporter, Sarah Needleman will discuss Netflix plan and the challenges it may face in the gaming arena. That’s after these headlines.
Democratic Senator, Amy Klobuchar introduced a bill that would strip online platforms like Facebook and Twitter of their liability protections if they spread misinformation about coronavirus vaccines or other public health emergencies. The bill would create an exception to a law known as section 230 that shields internet platforms from lawsuits stemming from the content generated by their users. The measure would only target misinformation around formally declared public health emergencies, and it would only apply when the platforms spread misinformation through programs like algorithms.
A string of earnings reports out yesterday showed continued strength in the tech sector. Chipmaker Intel reported better than expected earnings aided by strong PC related sales, though profit was flat from a year earlier.
Social media firms, Snap and Twitter both said they experienced strong ad sales growth. Snap’s revenue more than doubled year over year, and Twitter reported revenue growth of 74%.
A 22 year old British man was arrested on charges connected to last year’s hacking of Twitter that led to the takeover of 130 high profile accounts. The hijacked accounts, including those of Joe Biden, Bill Gates and Kim Kardashian were used to post messages soliciting donations to fake charities. The justice department said the man was arrested in Spain at the request of US law enforcement. He’s the fourth person to be charged in connection with the hack.
And a four year old startup says it’s built a battery that’s able to discharge power for days using one of the most common elements on earth, iron. We report exclusively that Form Energy based in Massachusetts wants to inform regulators and utilities that its iron air batteries could offer affordable long duration power storage by 2025 if its work continues to go as planned. The startup says using iron instead of the materials currently used in lithium ion batteries would reduce the cost from about 15 to $80 per kilowatt hour of storage to less than six.
All right, coming up, Netflix wants to get into gaming, but how will it fare against the players already in the field? We’ll discuss after the break. This week, Netflix released its second quarter earnings. The company said it added 1.5 million new subscribers. That’s slower growth than the streaming giant has seen over the last several quarters. But Netflix also announced plans to expand into something new, gaming. In a letter to investors, the company said it views gaming as another new content category for it, similar to how it expanded into original films, animation and unscripted TV. So how hard will it be for Netflix to enter this new category? Joining us to discuss is our tech reporter, Sarah Needleman. Hey Sarah, thanks for joining us.

Sarah Needleman: Thanks for having me.

Zoe Thomas: So tell me, why does Netflix want to get into gaming?

Sarah Needleman: Netflix wants to get in gaming because it’s a very lucrative business and games, unlike TV shows and movies, can provide entertainment for months or even years or longer. Game developers can update their games very easily over the internet with new maps, new characters, new modes of play. So they’re really sticky and long-lasting. And so for Netflix which is seeing slowing subscriber growth, it’s really important that the company retain its users and of course, add new ones. The other thing for Netflix is that it’s facing a lot of stiff competition within the video streaming realm. So user growth has been slowing and at the same time it’s facing its first serious challenges to its business. You have Walt Disney’s Disney+, Warner Media’s HBO Max, you have companies like Apple and Amazon that are spending aggressively on streaming content. The numbers go on Hulu, Peacock. There’s so many of them. So a lot of these just didn’t exist a few years ago and Netflix is looking for ways to expand its business.

Zoe Thomas: Netflix’s earnings were released the other day. What did that tell us about their gaming interests and how far they’re going to take it?

Sarah Needleman: Well, they confirmed that they’re going ahead to focus on mobile games, as opposed to console or PC games, at least at the start. And they will be free for subscribers so there won’t be an additional fee.

Zoe Thomas: Have they taken any steps to get into gaming so far?

Sarah Needleman: Well, the company has put out through a licensing deal, two games based on its Stranger Things franchise. Those had moderate success. What we’ve seen in recent years that they’ve hired some gaming industry talent. Jessica Neal, before she was named talent chief at Netflix in 2017, she was chief people officer at Scopely, which is a mobile gaming company. Netflix’s finance chief Spencer Newman was poached from Activision Blizzard in 2019. Now we have this new person come in, they just hired Mike Verdu. He comes from, most recently Facebook, but he has also been with a bunch of other companies in the gaming space.

Zoe Thomas: So why mobile gaming? Is there a reason Netflix wants to go down that route as opposed to PC or console gaming?

Sarah Needleman: When you look at the video gaming industry at large, mobile accounts for about half of the consumer spending. So another reason is that mobile games are just generally speaking, less complicated to make and less costly to make than console and PC games. So it’s a niche that’s a little bit more welcoming for a company that’s just getting started in the space. It does seem unlikely that someone’s going to suddenly subscribe to Netflix, gain access to some of its games, but if it produces a massive hit that you could only get on the Netflix app, then certainly it is possible we could see that happen. But Netflix’s price is really built around its video streaming business as opposed to games. Most of the games in the app stores today for mobile devices are free to play anyway. And so it seems a bit of a stretch to think that people would sign up for a Netflix subscription just to access games. But then again, if they’re really popular, if they have a smash hit, anything’s possible.

Zoe Thomas: So we know Netflix is facing increasing competition from other streaming platforms, but what kind of competition might it face in the gaming industry?

Sarah Needleman: It’s brutally competitive, especially in mobile. We’ve seen even the big well-established video game companies like Electronic Arts take to Ubisoft. They haven’t had massive success in mobile, and the success they’ve had has mainly been through acquisitions as opposed to in-house development. So we’re talking about a really, really tough industry to break into.

Zoe Thomas: Other TV and movie makers have tried to get into the gaming space, Disney and Viacom, for example, and they found it really difficult. What are experts telling you about how Netflix might fare?

Sarah Needleman: Well, it is really one of those remain to be seen. It depends on how much money they want to invest in video game development and the amount of people they hire, the kinds of games they make. If they do focus on games based on their properties, their original IP would make them stand out. But at the same time, we haven’t seen a lot of success in games based on movie and TV properties. The top 100 mobile grossing games in the US last year, 10 were based on TV shows or movies, but you also have to have the right kind of TV or movie property to lend itself to a video game. One of the analysts I spoke to said, “Do you want to play Bridgerton the game?” Maybe not. Gamers are very fickle. People change their minds and move from one game to the other. It is really hard to come up with one that sticks.

Zoe Thomas: That’s our reporter, Sarah Needleman. And that’s it for Tech News Briefing this week. Our supervising producer is Chris Zinsli. Our executive producer is Kateri Jochum. And I’m your host, Zoe Thomas. Thanks for listening and have a great weekend.