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Netflix's Pivot Into Online Gaming Is Risky, But Also Smart

Netflix
(Image credit: Netflix)

You’d be forgiven if you were somewhat puzzled by last week’s announcement from Netflix, the world’s largest streaming-video company, that it’s now going to be a video game company, too. It’s a puzzler, no doubt, but behind it could be an audacious vision designed to position Netflix to succeed where entertainment is heading, not just where the business already is. 

David Bloom

(Image credit: David Bloom)

For now, for most, the confusion is understandable. After all, though Hollywood studios have dallied for decades with video games—opening game divisions, selling off game divisions, making gawdawful movie adaptations of games—the two businesses look more alike than they really are. In tort law, you’d call it an attractive nuisance, like a backyard swimming pool without a surrounding fence. Someone’s going to jump in and then discover they don’t know how to swim. 

Indeed, executive comments during the Netflix quarterly earnings call on Tuesday were, if not red flags, at least mildly concerning. Maybe not in-over-your-head-and-drowning concerning, but still. 

"We view gaming as another new content category for us, similar to our expansion into original films, animation, and unscripted TV,” said COO and Chief Product Officer Greg Peters. “We really see this as an extension of the core entertainment offering. We think we have an opportunity to add games and deliver more entertainment value to our members with that.”

Well, yes, but…Hollywood has long made this assumption, that games are basically movies with more decisions, stretching back at least to the 1980s and that horrendous Atari misfire with E.T. that sent box loads of unsold game cartridges to a New Mexico landfill.  

Game development and marketing cycles are different, fan expectations and experiences also vary wildly, and the production skill base only moderately overlaps. 

Yes, there are scripts, but they’re 800 pages long, with dialogue forking down different narrative paths. Yes, there are actors, both for voiceovers and motion capture in cut scenes and animatics. Yes, there’s music and sound effects, but it’s different, because you might hear the same audio segment dozens or hundreds of times. And yes, there are visual effects and animation, just like the latest superhero blockbuster, but often they’re rendered in real time, as you make your way through a world. 

So getting into the game business won’t be just like figuring out how to build a compelling reality show. It’s not even clear how Netflix users will get access to the games when they become available. 

Peters said the games will be available for free as part of the base Netflix subscription. But the mechanism for downloading and playing a game will differ on every platform. It’s not just about clicking the app and hitting play. 

People access Netflix through a bewildering array of interfaces, few of which are gaming-capable (the Sony and Microsoft consoles, smart phones, and Apple TV make up the short list of the most able platforms). Accessing Netflix games could be complex, but making it simple and widely available will be vital if Netflix customers are to see any value from the initiative. 

Still, there are reasons for optimism, and for watching this move closely in the years to come. To begin with, the company will start slowly, with a “multi-year effort” starting with mobile titles, and including licensing its existing intellectual property to experienced game makers. 

The mobile-first approach solves the access issue, for now. As Peters put it, most Netflix customers have access to gaming-capable smart phones, though Netflix must navigate the vagaries of Apple’s App Store and various Android equivalents. With mobile, the company can experiment with a range of genres inexpensively and quickly, figuring out what works in various markets and audience segments.

“We’re going to start relatively small, learn, grow, then expand our investment,” Peters said. “We’re really excited about the different ways we can provide an offering that’s differentiated from what’s out there.” 

The company last week announced the hiring of Mike Verdu, a former executive with Electronic Arts and Facebook’s virtual-reality unit Oculus, to head its gaming initiative. He’ll bring the needed industry relationships, project-management experience and budgetary chops. 

And Verdu’s VR background is probably more crucial than anyone is discussing. While Netflix is starting with mobile, Peters said the company plans to create games of many kinds, for many platforms. Almost certainly, that will include immersive VR experiences. 

And that’s where this move finally starts to make sense. VR and other flavors of immersive computing are absolutely the next generation of not just entertainment but of computing in general. 

It’s why Facebook spent $2 billion way back in 2014 to buy a little-known startup called Oculus. That company’s $299 Quest 2 now dominates sales of VR headsets and is attracting more and more developers of a wide range of entertainment experiences. Apple, Microsoft, Snap and Alphabet are also spending billions of dollars to develop their own immersive devices and content.

Hollywood is heading here too, at least in producing its biggest projects. Game-derived tools such as Epic Games’ Unreal Engine are transforming traditional moviemaking in projects such as The Mandalorian and the latest Jungle Book, putting live-action actors amid digital sets in real time.

Netflix has been experimenting with games and immersive experiences for a while, notably with the 2018 Bandersnatch episode of its dystopian sci-fi anthology series Black Mirror. It also has licensed a series of games built around its Stranger Things franchise. Expect more of those, but it won’t end there. 

Next week, in fact, Netflix kicks off a touring VR experience, ‘Viva Las Vengeance: Army of the Dead’, built around its recent action-horror feature. Some 75 million subscribers watched the Zack Snyder-directed film in its first four weeks of release, the company said, and it already has spawned a spinoff and a prequel

In Viva Las Vengeance, groups of up to six participants fight virtual zombies from inside a taco truck over a 30-minute experience that evokes the movie, while separately a ghost-kitchen operator sells themed tacos and burritos to participants.

The experience debuts next week in Los Angeles, New York, Las Vegas and Washington, D.C., with plans to travel to another 17 U.S. cities in coming months.  

It’s easy to see Viva Las Vengeance as more marketing ploy than entertainment venture. But couple it with Verdu’s background and the broader game initiative, and it becomes clear that Netflix is headed toward a place where it’s long been successful: keeping its customers entertained for hours a day. Minus the themed Mexican food and haptic platform, Viva Las Vengeance will likely translate easily to an Oculus headset some day soon. 

While other media companies are still trying to figure out what direct-to-consumer streaming means to their legacy film, broadcast and cable divisions, or which competitor they can buy/partner with, Netflix is quietly starting to build the expertise to succeed in the next generation of entertainment. 

It has little choice, given the increasing competition it faces on all sides of its once-impregnable video-streaming redoubt. Netflix absolutely has to build beyond what it already has, into a hugely promising area that extends its vast store of intellectual property, while giving consumers more value for their subscriptions. But isn’t it interesting how few of Hollywood’s incumbents can say they’re doing the same?