Netflix - keeping up with a changing media environment

Netflix - keeping up with a changing media environment

"How are Netflix working on evolving to keep relevant and up to date with audience demands in the market today?"

Netflix, marking its first big move beyond TV shows and films, is planning an expansion into video games and has hired a former Electronic Arts and Facebook executive to lead the effort.

Mike Verdu will join Netflix as vice president of game development, reporting to Chief Operating Officer Greg Peters. Verdu was previously Facebook’s vice president in charge of working with developers to bring games and other content to Oculus virtual-reality headsets.

The idea is to offer video games on Netflix’s streaming platform within the next year. The games will appear alongside current fare as a new programming genre, similar to what Netflix did with documentaries or stand-up specials. The company doesn’t currently plan to charge extra for the content.

Netflix shares gained as much as 2.8% to $563.45 in premarket trading on Thursday. The stock had been up 1.3% this year through Wednesday’s close.

Netflix has been seeking ways to keep growing, especially in more saturated markets such as the U.S. That’s included building out its kids’ programming, opening an online shop to sell merchandise, and tapping Steven Spielberg to bring more prestigious movies to its lineup.

The company remains well ahead of streaming rivals such as Disney+ or HBO Max, but it added fewer subscribers than expected in its most recently reported quarter.

Pushing into games would be one of Netflix’s boldest moves yet. In Verdu, the company has an executive who worked on popular mobile games at Electronic Arts, including titles in the Sims, Plants vs. Zombies and Star Wars franchises. He also served as chief creative officer for Zynga between 2009 and 2012. This means that Netflix may have a greater market from the games as the executive has made games that are popular around the world.

 The company has already started advertising for game-development related positions on its website. Netflix will be building out its gaming team in the coming months.

Video games give Netflix another way to lure in new customers and also offer something none of its direct competitors currently provides.  Walt Disney, AT&T, WarnerMedia, and Amazon all have access to live sports, but they don’t have gaming within their main video services, which is a huge advantage for Netflix.

Ultimately, the move may make it easier for Netflix to justify price increases in coming years. Games also serve the purpose of helping market existing shows. Many of the largest tech companies do sell gaming options in addition to their video services. Apple has a platform called Arcade for games, as well as a TV+ service for original video projects. But it charges extra for the gaming.

Interactive Shows:

Netflix also has made earlier changes into interactive programming, such as choose-your-own-adventure-style shows. It created versions of programs like “Carmen Sandiego” and “Black Mirror” in that format, which stops short of being a true video game.

Netflix co-Chief Executive Officers Reed Hastings and Ted Sarandos have shared their interest in pushing into gaming in recent calls with analysts. They’ve also identified the battle-royale shooter game Fortnite as a competitor for its customers’ time.

Still, Hollywood studios have a checkered history in the video-game business. Some companies have had a lot of success licensing their movies or TV shows for games, and Warner Bros has created a handful of hit titles in-house over the years.

But Disney, the world’s largest entertainment company, shut down most of its in-house gaming operations after years of unsuccessful efforts. It has since focused on licensing Marvel and Star Wars properties for games.

"How Netflix have evolved with the evolution of technology to reach and satisfy audience demands."

Even as movies bring in record amounts of money at the box office, Netflix grows its number of subscribers by around 10% a year and now has an estimated more than 59 million subscribers in the U.S. alone. There’s no doubt Netflix is the definitive modern media company, and its impact is felt in a number of industries. It’s what experts call the Netflix Effect.

The Netflix Effect is when a new series catapults an unknown actor to fame - overnight - a result of millions of people binge watching a show.

Changing How Consumers View Content:

Before Netflix, consumers went to the movies, rented VHS tapes and/or DVDs and watched whatever was on live TV. But Nowadays, consumers can stream content instantly to and with any device, anywhere they like. Netflix has changed how consumers access film and TV. They are no longer super-glued to the TV and forced to sit through commercials. In 2018, the number of people who cut the cord increased by nearly 33%, to 33 million people. At the same time, Netflix users were increasing. Consumers prefer the flexibility of being able to watch what they want and when they want.

One of the biggest factors for consumers deciding how to view content is the programming. Consumers don’t want to pay for content they won’t watch. Netflix spent a staggering $13 billion on content in 2018, with around 85% of that going to original shows. Original content is what stands out to viewers. They can watch most network shows in multiple places, but they can only get original content straight from Netflix, which is one of the main reasons why Netflix is getting such a profit from consumers.

The Netflix original movie Bird Box was watched by 45 million accounts its first weekend. When translated to box office dollars, the movie would smash anything currently in theaters.