Netflix is making its first move beyond TV shows and movies, and expanding into video games. It has hired Mike Verdu, ex-EA Sports and Facebook, to lead the effort. Netflix stock was up 4% in extended trading yesterday, while fan-favorite GameStop tanked as much as 13%.
The idea is to offer games on the Netflix streaming platform as a new "genre," similar to what Netflix did with documentaries and stand-up specials. It won't charge extra for the content but will lure an additional demographic of the market. None of its streaming competitors, Disney, AT&T's WarnerMedia and Amazon, provide gaming within their main video services. Eventually the move will make it easier for Netflix to justify price increases.
The California-based company has yet to settle on a game-development strategy. Netflix will be building out its gaming team in the coming few months and has already started advertising for game development related positions on its website.
Short Squeez Takeaway: As Netflix's US market saturates and competitors become stronger (Disney+ has amassed 100m+ users since launch in Nov'19), Netflix needed to find ways to keep its pole position in the streaming wars. Building out a gaming platform will give it new subscribers and growth in existing markets. For context, Netflix has 208 million subscribers, while Roblox (gaming platform that recently went public) has 42 million users.