Netflix Shifts Gears in Gaming as It Pursues New Strategies

Recently, I suggested that Netflix’s next blockbuster might emerge not from its film or TV divisions but from its push into gaming. The company has been developing interactive specials, which seemed to lay the foundation for a more conventional gaming approach. However, it appears I may have missed the mark. While Netflix remains committed to gaming, it will not continue with these interactive experiences long-term.

Change in Gaming Direction at Netflix

Mike Verdu, Netflix’s head of gaming and a notable figure in the video game industry, hinted last December at a tactical shift. He stated, “We’re not building those specific experiences anymore,” in reference to interactive shows like Black Mirror: Bandersnatch and Cat Burglar. Verdu expressed that interactive storytelling had “very limiting” constraints, prompting Netflix to pivot towards more ambitious gaming projects.

The company is now set to accelerate this change, as reported by The Verge. Most interactive specials will vanish by December 1, 2024. However, Bandersnatch, along with an Unbreakable Kimmy Schmidt game and two interactive experiences featuring Bear Grylls, will remain. Approximately 20 interactive specials are being phased out.

Leveraging AI for Game Development

In conjunction with these changes, Verdu’s role at Netflix is evolving. He has recently been named vice president of generative artificial intelligence (AI) for games. In this capacity, Verdu aims to harness generative AI as a creative resource to expedite the development of new titles.

“I am focused on a creator-first vision for AI, one that puts creative talent at the center, with AI being a catalyst and an accelerant,” Verdu shared in a LinkedIn post. He believes AI will allow larger game teams to work more efficiently and provide smaller teams with unprecedented capabilities.

Netflix continues to invest heavily in gaming. Early efforts to make games playable via smart TVs didn’t resonate well with audiences. Currently, the company boasts over 100 mobile games, many of which can be enhanced through interaction with your TV. More titles are on the way, particularly as Verdu explores ways to streamline the development process using generative AI.

What’s Next for Netflix Games?

Netflix is actively producing a variety of games, some being major titles like Grand Theft Auto: San Andreas and Bloons TD 6. Others are unique creations linked to Netflix properties, such as Stranger Things: 1984 and Too Hot to Handle 3. Clearly, the range of available games will expand, and the number of new releases is expected to rise significantly in 2025 and beyond. The decision to retire interactive shows signals they may not have captured widespread popularity, with only a select few remaining.

For instance, Bandersnatch was viewed 900,000 times in the first half of 2024 — a commendable figure for a six-year-old piece that caters to an adult audience with a TV-MA rating.

Exploring New Revenue Streams for Netflix Games

As Netflix manages its gaming landscape, it is also probing ways to monetize these games, which are currently part of any Netflix video streaming subscription. The games refrain from using common monetization models like pay-to-win features or in-game purchases.

It wouldn’t be surprising to see modest advertising integrated into future game releases, as Netflix has ventured into ad-supported video subscriptions and is gaining experience in digital advertising. One can speculate about the eventual separation of its video and gaming services, mirroring the controversial Qwikster initiative that laid the groundwork for today’s Netflix.

To give some context on Netflix’s past performance:

NFLX data by YCharts.

Netflix may be on the verge of a new evolution, delving into the gaming sector with the help of AI. While previous results do not guarantee future success, this pivot could resemble the transformative impact of the Qwikster launch. It might be wise to consider holding Netflix shares as Verdu’s new initiatives unfold.

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Anders Bylund has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.