Netflix apparently wants to break into the video game business. Experts say that’s a bad idea.

Reed hastings ted sarandos
Netflix co-CEOs Reed Hastings, left, and Ted Sarandos, right. Getty
  • Netflix is reportedly fishing around for a major video game business executive to hire.
  • The company intends to expand its gaming efforts – to break into the lucrative video game industry.
  • That initiative is likely to fail, given the history of tech and entertainment companies in gaming.
  • Visit the Business section of Insider for more stories.

With over 200 million paid subscribers worldwide, Netflix is an absolute behemoth.

The streaming entertainment giant has successfully transitioned from a scrappy startup paying to license its content to a major player in Hollywood, splashing out tens of millions of dollars on its own productions.

So, what’s next for Netflix? The answer to that question, at least in part, appears to be video games.

Netflix is fishing around for a gaming executive to help it expand out its gaming initiative, according to a recent report in The Information. While the company has acknowledged an interest in interactive entertainment, it has yet to decide what this will mean in practice. Licensing content from existing game makers? Making its own games? And how will you actually play those games?

While we still don’t know much about Netflix’s plans, one thing is clear right now: Netflix getting involved in gaming is almost certain to fail.

“I do think they will try, and do think they will fail,” Wedbush managing director Michael Pachter told Insider. “It’s hard to make games.”

Bandersnatch choice
‘Black Mirror: Bandersnatch’ is an ‘interactive movie’ on that is more choose-your-own-adventure than video game. Netflix

Indeed, the video game industry is a very risky business, and even entrenched studios with top-tier talent and years of experience regularly go under. “We have the failures of THQ, Midway, Acclaim, 3DO, BAM, Eidos, Atari, Infogrames, Interplay, and probably a few others to illustrate how hard it is,” Pachter said. “I don’t see how Netflix could possibly think it can develop and sell games.”

Joost van Dreunen, author of “One Up: Creativity, Competition, and the Global Business of Video Games,” echoed Pachter’s skepticism.

“Big tech sucks at games,” he told Insider.

He pointed to Google’s Stadia, Amazon’s Luna, and Facebook’s scattershot gaming efforts across the last decade as prime examples of how major tech companies routinely fail at gaming initiatives.

Google and Amazon and Facebook have poured hundreds of millions of dollars into gaming across the last decade, yet none are major players in the video game market. “They look at it in a way that distribution goes before the content,” Van Dreunen said, “and that’s the wrong way around.”

Instead of creating video games and building beloved brands, they’ve largely focused on the mechanics of how you buy and access those games: Google’s Stadia platform, a Netflix-like video game streaming service, is a prime example.

Less than two years after Google announced a major game development initiative led by “Assassin’s Creed” creator Jade Raymond, and less than one year after outright buying a video game studio, the company folded those efforts this past February.

What’s Google focusing on for its big gaming service rather than making games for it?

An “increased focus on using our technology platform for industry partners,” Google Stadia Vice President Phil Harrison said in a blog post – a pretty huge step back from the splashy announcement of Stadia back in 2019, which promised a new digital service that would compete against the likes of Nintendo, Sony’s PlayStation, and Microsoft’s Xbox.

FILE PHOTO: Google vice president and general manager Phil Harrison speaks during a Google keynote address announcing a new video gaming streaming service named Stadia that attempts to capitalize on the company's cloud technology and global network of data centers, at the Gaming Developers Conference in San Francisco, California, U.S., March 19, 2019. REUTERS/Stephen Lam
Google VP Phil Harrison speaks during a Google keynote address announcing Google Stadia at the Game Developers Conference in San Francisco, March 2019. Reuters

For Netflix, which has the benefit of owning a beloved intellectual property like “Stranger Things” that could lend itself to games, another problem exists.

“Building games from owned IP is also super hard,” Pachter said. “Disney has failed at least three times trying to do so, and its IP is much stronger than Netflix.”

In recent years, Disney’s biggest properties – from Marvel characters to the “Star Wars” franchise – have found success in gaming by Disney largely handing over creative control to major video game companies.

Examples include 2018’s “Marvel’s Spider-Man” and 2019’s “Star Wars Jedi: Fallen Order.” The former, a PlayStation 4 exclusive game made by Insomniac Games, sold over 20 million copies. The latter, a multiplatform “Star Wars” game with original characters and story, sold over 10 million copies.

At approximately $60 apiece, each game has grossed well over $1 billion in sales.

Spider-man (PS4)
2018’s ‘Marvel’s Spider-Man’ for the PlayStation 4. Sony/Marvel

Netflix could follow a similar model and potentially find success.

The company could build a wildly successful game streaming service that seamlessly leverages its existing streaming service. It could spend years, and hundreds of millions of dollars, building its IP into major game franchises.

Or it could buy its way in, splashing out billions of dollars on a major game publisher like EA or Ubisoft – akin to Amazon’s recent purchase of MGM Studios, but for gaming. That would require a major, long-term institutional buy-in from Netflix, in addition to major financial investments.

“You need to have the stomach,” Van Dreunen said. “Like when you look at Google and Amazon – they just don’t have internally the numbers or the understanding of the space to say, ‘Yeah, you know what we should do? Spend $10 billion to really break in.'”

For its part, Netflix hasn’t detailed its gaming plans just yet – but the company is acknowledging the reported interest in a larger gaming investment in the future.

“Our members value the variety and quality of our content,” the company said in a statement. “Members also enjoy engaging more directly with stories they love – through interactive shows like ‘Bandersnatch’ and ‘You v. Wild,’ or games based on ‘Stranger Things,’ ‘La Casa de Papel’ and ‘To All the Boys.’ So we’re excited to do more with interactive entertainment.”

Got a tip? Contact Insider senior correspondent Ben Gilbert via email ([email protected]), or Twitter DM (@realbengilbert). We can keep sources anonymous. Use a non-work device to reach out. PR pitches by email only, please.