“For Netflix, that is an extension of their content material technique.” Analyst at Netflix Gaming Foray
Netflix (NFLX) is entering the gaming sector with the hiring of a 30-year gaming industry veteran – former EA (EA) and Oculus manager Mike Verdu. The company’s stock fluctuated following the news today, with the stock price falling a little more than 1% since the market opened.
“I think this is an extension of their content strategy – an extension of how they got into non-scripted and premium movies, kids’ programming and the like,” Matthew Thornton, an analyst with Truist Securities (TFC), told Yahoo Finance Live.
Thornton joined Yahoo Finance Live to discuss the hiring of Verdu, as well as what Netflix’s speculative expansion into the video game industry means for the company and its competitors. Some experts believe the initiative will be “dead on arrival” and point to the difficulty of breaking into a historically cutthroat gambling market.
[Read more: Netflix entering gaming will be ‘dead on arrival:’ Analyst]
On the flip side, Thornton believes there might be a way for Netflix to differentiate its content offerings and increase subscriber engagement and retention from other big players in the content streaming industry like Hulu and Amazon Prime (AMZN). The ultimate goal in this move is to drive subscriber growth and revenue, according to Thornton.
Istanbul, Turkey – July 1, 2018: Woman using tablet computer and looking for an online streaming platform. The tablet PC is an iPad Air 2 developed by Apple Inc.
Will Netflix become a major player?
However, Netflix’s content strategy for future video game offerings remains to be seen. Thornton said that Netflix’s greatest chances would emerge if it chose to work with third-party video game studios and publishers, which would likely give them the best chances of survival in the face of platform giants like Microsoft’s Xbox (MSFT), Sony’s PlayStation (SONY) and Nintendo (NTDOY).
On the chances of this actually happening, Thornton said that Netflix has never proven itself to be an acquiring company, as it has only acquired a handful of small businesses during the life of the company. This is in stark contrast to large, established video game publishers like EA, Activision Blizzard (ATVI), Take-Two (TTWO), and Zynga (ZNGA).
The story goes on
“[If Netflix produces video game content in-house,] it would likely be quite small, would be very slow to scale, and would likely not unduly disrupt the entire video game sphere, but again could be beneficial to their business, “he said. “They could also get more aggressive by making acquisitions to complement their own organic development efforts.”
Thornton said Netflix’s entry into the gaming market was another foray into an all-digital video game industry. With each passing year, digital downloads displace the physical purchase of video games more and more. And while Netflix’s announcement is unlikely to change the evolution of the industry much, Thornton noted that it will be interesting to see how the company prices its video game products since Netflix is a subscription-based service.
Microsoft is currently at the top of the subscription-based video game food chain with Xbox’s Game Pass.
“There are subscription gaming services out there. But they tend to coexist with transactional, digital game downloads, ”Thornton said. “The real trend is, of course, when it comes to buying in-game content.”
Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter: @thomashumTV
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