Netflix and Microsoft show that gaming has become too big to ignore


Young happy Asian couple playing video games in the living room. Cheerful people having fun with computer game concept.

Blue Planet Studio

The video game industry is having a moment.

Less than two weeks after Take-Two announced its $12.7 billion for Zynga, and just days after Microsoft announced its record $69 billion acquisition of Activision Blizzard, the co-founder and co- Netflix chief executive Reed Hastings said Thursday that building the video game where Netflix can “wow our members by having the absolute best in class” is its goal.

“We have to be different in this area,” Hastings said on Netflix’s earnings conference call. “When mobile gaming is world leader, and we’re among the top producers, like where we are in cinema today, with two of the top ten, then you should be wondering what’s next. Let’s fix the problem and don’t just be in it for the sake of it.”

It’s a daunting task for Netflix, which is building its gaming unit from the ground up. Netflix chief operating officer Greg Peters said Thursday that the company plans to license “big game” intellectual property that “people will recognize” later this year. Hastings added that Netflix will use its “walk, crawl, run” strategy around gaming, where it deliberately grows the business incrementally to learn more about user habits and use resources efficiently.

Netflix, of course, has used this general strategy before – in streaming video. The company licensed well-known movies and TV shows to grow its user base as a cable TV supplement before slowly branching out into original content. After years of experimenting show by show or movie by movie, Netflix found that its recommendation algorithm and user data could accurately predict popular new original content. Today, Netflix spends billions of dollars each year on originals.

Microsoft’s acquisition and Netflix’s commentary is a general recognition that gaming has become an important part of global entertainment, especially among young audiences. Netflix has often pointed out that games, such as Fortnite, compete with its main streaming service for eyeballs.

It’s not new, exactly. Microsoft has owned Xbox for decades. But he obviously never spent nearly $70 billion to acquire anything., not to mention a video game company.

Gaming has caught the attention of many as companies like Meta and Roblox strategize around a loosely defined, immersive computing strategy called the “metaverse,” which will almost certainly involve gaming on some level.

But the acquisition rush probably suggests something much simpler: gaming has become ubiquitous. Mobile devices and online gaming, allowing people to play games in real time, have given the game a wider audience and prominence in youth culture. The Entertainment Software Association, America’s video game trade association, says more people are playing video games than ever before.

Big tech and media companies have flirted with gaming in the past, with mixed success. Disney and Google are among the big companies that have decided to abandon their video game aspirations in recent years. And it’s probably far too early to position a company for the Metaverse, when it’s still unclear what the Metaverse encompasses.

But gaming is clearly of major interest to two of the biggest tech companies in the world. That’s significant, and it likely means there’s more game consolidation to come.

WATCH: There’s probably more risk than people realize, says MoffettNathanson’s Michael Nathanson


Comments are closed.