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Netflix Has Announced That It Will Begin Streaming Video Games In The Coming Months.
Netflix

Netflix Has Announced That It Will Begin Streaming Video Games In The Coming Months.


SAN RAMON, Calif. (AP) — As people emerge from their pandemic cocoons, Netflix has seen its worst slowdown in subscriber growth in eight years, so it's adding a new attraction to its marquee: video games.

The video streaming behemoth announced on Tuesday that it will include video games in its existing subscription plans at no additional cost, but did not specify when the service would go live or what types of games it would create.

The long-awaited expansion was confirmed alongside the release of Netflix's latest earnings report, which revealed that the video service added 1.5 million subscribers during the April-June period, slightly better than the modest increase that management predicted after the service stumbled to a sluggish start during the winter months, but still far below expectations.

Netflix's net gain of 5.5 million subscribers in the first six months of this year is the company's worst first-half performance since 2013, when the company was still focusing on original programming as it expanded beyond licensing existing TV shows and movies.

The Los Gatos, California-based company hinted at the move last week when it announced the hiring of a veteran video game executive, Mike Verdu, to explore potential opportunities in another field of entertainment.

“We’re doing them to help the subscription service grow and be more important in people’s lives,” Netflix co-CEO Reed Hastings told investors during a Tuesday meeting.

Netflix's chief product officer, Greg Peters, stated that the company will first focus on mobile games before expanding to consoles and television sets. The games will initially be tied to Netflix's most popular programming, but standalone titles may be added to the mix as well. Peters even speculated that Netflix may eventually create a TV series or film inspired by one of its video games.

“There’s a big, big prize here, and our job is to focus,” Peters said.

Despite this year's slowing growth, Netflix remains by far the world's largest streaming service in a field that includes Walt Disney Co., HBO, Amazon, and Apple. Netflix had 209 million worldwide subscribers at the end of June.

Netflix's size has also resulted in consistent profits, with the company earning $1.35 billion, or $2.97 per share, nearly doubling from the same time last year, and revenue increasing by 19% to $7.3 billion.

However, the disappointing first-half results are a stark contrast to last year, when government-imposed lockdowns around the world drove people into binge-watching frenzy while cooped up at home. Netflix, which was already the world's largest video streaming service when the pandemic began in March 2020, added 26 million subscribers in the first half of last year.

While no one expected Netflix to keep up its breakneck pace, the drop in subscriber growth this year has been more severe than expected. Netflix shares have fallen by about 10% from their peak of $593.29 six months ago, and the stock edged up slightly in extended trading after the news was released on Tuesday.

Netflix management has attributed a portion of this year's slowdown to pandemic-induced production delays, which have left its video service with fewer proven hits. The Los Gatos, California-based company expects that problem to fade during the second half of this year, with new-season releases of popular series such as "Sex Education" and "The Witcher," as well as movies starring big-name stars such as Leonardo DiCaprio.

Even so, Netflix disappointed investors with a forecast of only 3.5 million new subscribers during the July-September period, well below analyst expectations of 5.6 million new subscribers in the third quarter, according to FactSet Research. The “quite underwhelming” guidance raised further concerns about intensifying competition in video streaming, as well as the fallout from pandemics.

The cautious outlook suggests that Netflix does not expect an immediate boost from its entry into a highly competitive video game market already dominated by far more experienced companies such as Epic Games, Microsoft, and Electronic Arts.

However, if the move into video gaming pays off, it could eventually give Netflix more leverage to raise its prices. The company has already been gradually raising subscription costs in recent years, helping to boost its average monthly revenue per subscriber to $14.54 in its largest market, which includes the United States and Canada, a 16% increase from $12.52 per month two years ago.

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