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Netflix gears up for gaming, with initial focus on mobile

Netflix shed some light on its expansion into gaming, announcing on Tuesday that the new offering will be included in Netflix subscriptions at no added cost – similar to the approach it has already taken with its expanding slate of original films and TV series.

Netflix is in the "early stages of further expanding into games," the company noted in its Q2 2021 letter to investors (PDF) while refencing some early efforts focused on interactivity with Black Mirror Bandersnatch and a game centered on its Stranger Things franchise.

Now that it's nearly a decade into its push into original programming, Netflix said it believes "the time is right to learn more" about how its subscribers value games.

Netflix's move into gaming is entering play as the streaming giant starts to endure small subscriber losses in areas such as the US and Canada and see its overall rate of subscriber growth start to slow down.

"We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV," Netflix added. "Initially, we'll be primarily focused on games for mobile devices."

This new focus on gaming will be a "multiyear effort," Greg Peters, COO and chief product officer at Netflix, said on Tuesday's earnings call. "We're going to start relatively small, we'll learn, we'll grow where we focus our investment based on what we see is working and we'll just continuously improve based on what our members are telling us is working.

He also believes that Netflix's subscription model will yield opportunities in gaming. "We don't have to think about ads, we don't have to think about in-game purchases or other monetization, we don't think about per-title purchases," Peters said.

Though mobile will be a big gaming focus for Netflix early on, ultimately Netflix sees all devices it currently supports as "candidates for some kind of game experience," Peters added, noting that Netflix will offer both standalone original games as well as licensed titles.

"We'll be very sort of experimental and try a lot of things in this phase," Peters said. "Maybe someday, we'll see a game that spawns a film or series that would be an amazing place to get to, and really see the rich interplay between these sort of different forms of entertainment."

Those details emerge about a week after news that former EA, Zynga and Atari exec Mike Verdu, who most recently served as VP of AR and VR content at Facebook, joined Netflix to help with its move into gaming.

Subscriber lumpiness

Netflix added about 1.5 million paid streaming subscribers in Q2 2021, beating guidance of 1 million, and ending the period with a global base of 209.19 million paid streaming subs.

Netflix's Q2 2021 subscriber take slowed significantly from adds of 10.09 million in a year-ago quarter marked by the early stages of the pandemic and stay-at-home orders, and adds of 3.98 million in Q1 2021.

Of note, Netflix lost 430,000 subs in its US/Canada region, attributing it to a large membership base there (73.95 million at the end of Q1 2021) paired with a seasonally smaller quarter for subscriber acquisition. Meanwhile, Netflix added 190,000 in the Europe, the Middle East and Africa region, added 760,000 in Latin America, and tacked on 1.02 million in the Asia-Pacific region.

Overall, the pandemic "created some lumpiness" in subscriber growth in the quarter, Netflix said.

Looking ahead, Netflix expects to add 3.5 million paid streaming subs in Q3 2021 and extend its grand total to 212.68 million.

If Netflix hits that forecast, it will have added more than 54 million paid net adds over the past 24 months, or 27 million on an annualized basis over that time period, "which is consistent with our pre-COVID annual rate of net additions," the company said.

— Jeff Baumgartner, Senior Editor, Light Reading

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