With Disney+ (NYSE: DIS), Hulu, and Amazon Prime (NASDAQ: AMZN) on the rise, Netflix (NASDAQ: NFLX) is looking to expand upon its current status as the king of streaming by adding video games to the platform. According to the company, games will be added and available without an additional charge within the next year.
According to initial reporting by Bloomberg, video games will be shown as a new genre alongside existing categories like documentaries and dramas.
Netflix has been a pioneer in streaming, leading to its current user base of 200 million subscribers. Those subscribers serve as the company's sole source of revenue, and they have so far been a reliable resource. However, with the pandemic coming to an end and potential users going back to work, recent subscriber growth reports have been dismal.
After giving forecasts that the platform would have 210 million subscribers by the first quarter of 2021, Netflix reported on July 13 that its global subscriber count stood at 208 million.
"We believe paid membership growth slowed due to the big Covid-19 pull forward in 2020," Netflix wrote in a letter to investors.
Netflix claimed that after last year's boom in the midst of the pandemic, it was hard for this year's numbers to hold up in comparison. It also argued that pandemic production delays are likely to lead to thin offerings throughout the first half of this year, but that the television and film lineup should recover by the second half.
Despite strong first-quarter profits, Netflix's share price fell by as much as 11% in after-hours trading following the disappointing subscriber announcement. Investors were clearly looking towards that subscriber growth count as a sign of the company's health.
Now, the company plans to take a page out of its competitors' books by diversifying. After all, Disney and NBCUniversal (NASDAQ: CMCSA) already sell merchandise and theme park tickets. Unlike Netflix, they aren't fully reliant on their streaming platforms for a source of revenue. Video games might look like a good way for the company to shore up its bottom line.
This also isn't the first time that Netflix has gotten into gaming. In 2019, the platform announced that it would be releasing a "Stranger Things"-based game for iPhones (NASDAQ: AAPL) and Androids (NASDAQ: GOOGL) as well as a "The Dark Crystal: Age of Resistance" series-based game for the Nintendo Switch (OTC: NTDOY), Playstation 4 (NYSE: SONY), and Xbox One (NASDAQ: MSFT).
Mike Verdu has been brought on to serve as the vice president of game development. He previously worked as Facebook's vice president of content overseeing the company's foray into virtual reality. He has also served as the vice president of mobile for gaming giant Electronic Arts (NASDAQ: EA).
There are some reasons to be wary of Netflix's upcoming video game venture: streaming games has historically been a flop. Ads for Google's Stadia were plastered across the internet prior to its launch, but Google recently announced that it would be abandoning the service after less than two years. Amazon has also tried and failed to start a streaming platform as well as a free-to-play "Fortnite"-style game.