Netflix takes out the ‘game monetization’ card, is it a misjudgment or an act of God?

Netflix aims to ‘generate revenue’ from gaming service, seeks to recover investment
From a means of expanding IP and increasing retention time to a full-fledged ‘product’
The number of actual game users is only 1%, risk of hasty ‘monopoly’ of paying for the game

There have been reports that Netflix is ​​likely to introduce additional fees, advertising, and charging elements into its game service. On the 5th, the Wall Street Journal (WSJ) cited a source familiar with the discussion and reported, “Netflix executives have been discussing ways to generate revenue from game services for recent months.” It is interpreted that the company is aiming to improve profitability in earnest by charging a fee for game services whose usage rate is significantly lower than the investment cost.

Netflix, which swallowed up many game developers, is the end of ‘free games’?

Netflix entered the gaming industry in earnest in November 2021 by launching five mobile games included in the Netflix subscription membership. Since then, it has built its foundation by acquiring numerous game developers, including ‘Spray Parks’, which developed Triple Town and Cozy Groove, ‘Next Games’, which developed the Walking Dead mobile game, and ‘Night School Studio’, which developed Oxenfree. As of last year, there were more than 11 game titles provided by Netflix.

In November last year, the mobile version of Japanese game developer Sega’s popular soccer management game ‘Football Manager 11’ was exclusively released. Netflix paid subscribers can enjoy the game for free, but non-Netflix users cannot access the game. It is interpreted as a plan to increase the attention of the game business and attract new membership subscribers by exclusively operating ‘traditional masterpieces’ that have been in service since 2024.

For Netflix, games are a type of strategic content to retain users. Most games have the effect of encouraging repeated access and increasing the user’s retention time. This is the fundamental reason why Netflix has lowered access barriers by providing game services without additional subscription fees or advertisements. However, through this report, a fundamental ‘seismic shift’ occurred in Netflix’s game business. The game has become a product rather than just additional content.

Insufficient game awareness, concerns over risk of paid strategy

From the beginning, Netflix was focusing on mobile games using its own IP (intellectual property rights). It is a kind of ‘IP expansion’ strategy. The acquisition of game companies, investing astronomical amounts of investment, is also interpreted as an attempt to strengthen the company’s own game development capabilities. However, according to app analysis company Apptopia, only 2022% of all Netflix subscribers used Netflix games in August 8. Most people were either unaware of the existence of game services, or even if they were aware of them, they did not use them.

Faced with difficulties in recovering investment costs, Netflix eventually abandoned the existing concept of ‘free games’ and took out the paid game card. WSJ analyzed that Netflix will implement a full-scale paid policy in the future, such as adding in-game charging elements (partial pay), demanding additional fees for premium games, and exposing in-game advertisements to subscribers of advertising plans. This is a commonly used method of generating revenue in the mobile game industry.

However, the industry has doubts about Netflix’s judgment. The analysis is that at a time when the user base is not properly secured, if a paid card is introduced, it could be counterproductive by creating antipathy from consumers. Some even raise concerns that Netflix will follow in the footsteps of Amazon Games, a gaming company under Amazon. Amazon Games invested a large budget and released its own games such as ‘Lost Ark’ and ‘Crucible’, but they failed to be box office hits due to insufficient gameplay and were ignored by consumers.