Netflix Netflix

Netflix has been hinting for a while that it will expand into gaming, but it wasn’t until yesterday that it revealed definitive details about its new gaming efforts.

Here is what the company told investors during its quarterly report:

We’re also in the early stages of further expanding into games, building on our earlier efforts around interactivity (eg, Black Mirror Bandersnatch) and our Stranger Things games. We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV. Games will be included in members’ Netflix subscription at no additional cost similar to films and series. Initially, we’ll be primarily focused on games for mobile devices. We’re excited as ever about our movies and TV series offering and we expect a long runway of increasing investment and growth across all of our existing content categories, but since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games.

Netflix co-founder and co-CEO Reed Hastings has previously acknowledged that the company needed to be in the gaming space. “We compete with (and lose to) Fortnite more than HBO,” he told investors in 2019.

The streamer’s gaming efforts are led by Mike Verdu, a former exec at Electronic Arts and Facebook, recently hired as vice president of game development.

At least one financial analyst has reacted to the gaming news with skepticism. Wedbush analyst Michael Pachter wrote in a research note today:

[W]e question whether the company has any idea how difficult the mobile games business has become. The business graveyard is littered with the corpses of content companies that have failed at making mobile games, with Disney the most prominent failure. Even video game publishers like Activision, EA, Take-Two, Ubisoft and Nintendo have tried for years to create compelling mobile content, and each has had lasting success only through acquisition.

In its most recent quarter, Netflix added 1.5 million paid memberships, lifting its overall global membership to 209.2 million. But here’s a concerning stat that reflects the increased competitiveness of the streaming biz and helps explain why Netflix is looking to games as a new front: in its most recent quarter, Netflix lost 430,000 subscribers in the U.S. and Canada. Even after these subscriber losses, Netflix still has 74 million U.S. and Canada subscribers, more than any other region.