Netflix Inc (NASDAQ: NFLX) entered the gaming industry in 2021, offering ad-free and in-app purchase-free games, which seems to be succeeding. In 2023, downloads of Netflix Games surged by 180%, reaching 81.2 million worldwide, marked by a significant increase in fourth-quarter downloads, which comprised 53% of the total downloads for the year.
Netflix initially focused on casual games and those tied to popular shows like "Stranger Things," but it soon expanded by acquiring game studios, including Night School Studio and Spry Fox.
These acquisitions enabled Netflix to diversify its game portfolio and establish studios globally, TechCrunch reports.
The company is now exploring cloud gaming while continuing to strengthen its mobile gaming presence.
The addition of Grand Theft Auto: San Andreas has been a notable success, becoming Netflix's most-downloaded game ever. Other GTA titles also performed well, contributing significantly to Netflix's gaming downloads in 2023.
Netflix's gaming library is diverse, with the most popular genres being Action, Lifestyle, and Puzzle. "Too Hot to Handle" and the fairy tale puzzler Storyteller were particularly successful in their respective categories.
These games complement Netflix's streaming content, though not all games are directly related to Netflix shows.
Despite the success of specific titles, Netflix faced periods of stagnant download numbers, indicating the need for continuous game releases and promotion.
In response, Netflix released 40 games last year, including "Monument Valley" and "Oxenfree II: Lost Signals," experimenting with TV gameplay and personalized gaming suggestions.
As part of its growing focus on gaming, Netflix is developing a multi-platform game with a new AAA studio, signaling its commitment to expanding its gaming portfolio, which currently stands at 89 titles with nearly 90 more in development.
Netflix Games enhances its appeal by adding Sonic Mania Plus, Game Dev Tycoon, FashionVerse, and Cozy Grove: Camp Spirit to its gaming portfolio.
This expansion includes the iconic Sonic game for iOS and Android users and follows the addition of three classic Grand Theft Auto titles in November.
By broadening its gaming library, which will more than double with 90 new titles in 2024, Netflix aims to offset the impact of its recent price hikes, including a $3 increase to its top-tier Premium plan, now priced at $22.99 in the US.
Despite this growth, some Netflix executives and investors have shown concerns about the strategy of the gaming division, especially as the company plans to expand its budget for developing console-quality games.
Netflix has reportedly invested around $1 billion in its gaming division, a fraction of its $17 billion annual budget for shows and movies.
Netflix stock gained 46.2% last year versus the broader index Invesco QQQ Trust, Series 1 (NASDAQ: QQQ) gain of 47.2%, and Walt Disney Co's (NYSE: DIS) 7.3% loss.
Warner Bros. Discovery, Inc (NASDAQ: WBD) lost 13%, and Paramount Global (NASDAQ: PARA) lost 29.4% last year.
Price Action: NFLX shares are trading higher by 3.77% at $496.33 on the last check Thursday.