Netflix’s Game Studio Buying Spree Lays Groundwork for Next Streaming Battle
When Netflix first announced its plan to enter the gaming space last year, some analysts questioned how serious the streaming company was about becoming a real competitor. After all, video games were an entirely new form of entertainment, with major entrenched players, and was outside of the company’s historical comfort zone.
The company still hasn’t had any breakout hits (the gaming section has only been live for a few months, of course), but any doubts about Netflix’s seriousness have been quieted. On March 24, Netflix announced that it had acquired its third video game developer in the last six months: Allen, Texas-based Boss Fight Studios.
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The deal did a few things for the company. First, Boss Fight can join the other two developers Netflix has acquired recently, California’s Night School Studio and Finland’s Next Games, in turbocharging its original gaming content. Second, as Netflix vp gaming studios Amir Rahimi said when announcing the Boss Fight deal, the acquisition “will also enable us to tap into great creative talent beyond California,” where Night School is located, and where Netflix’s in-house gaming team is based.
The rationale for Netflix’s expensive foray into gaming comes as its subscriber growth appears to have slowed, at least in North America, and the company looks to turn its fortunes around through new offerings. But it may also be painting a picture of what’s to come for other streaming services when they hit maturity.
In its 2022 Digital Media Trends Survey, the consultancy Deloitte found that among Gen Z consumers, video games are the preferred form of digital entertainment, with older consumers preferring movies and TV shows.
“Historically, the younger generation tends to be a window into the future,” Jana Arbanas, vice chair, Deloitte LLP and U.S. telecom, media and entertainment sector leader, says. “Gaming is just an important element to entertainment that streaming companies can’t ignore and need to be thinking about. As those consumers grow up, what does that mean? Especially as gaming is taking away time spent watching TV or video.”
And if subscriptions are waning with TV and film content, games may be a pathway to renewed growth. It can also help to justify price increases, such as the ones the company instituted earlier this year.
But the Boss Fight deal also underscored just how much Netflix’s strategy has shifted over the last year or so, as its subscriber growth has slowed. Since its founding in 1997, the company rarely acquired companies, preferring to build out its teams internally.
“You can tell from our track record, we are fairly selective when it comes to M&A,” Netflix vp finance and investor relations Spencer Wang told analysts on the company’s Oct. 2021 earnings call.
But Wang added that if a company had skills or IP that the company coveted, and was unencumbered elsewhere through existing deals, it was open to making moves.
Hence the flurry of M&A activity from Netflix over the past year. In addition to the three gaming studios, Netflix also acquired the Roald Dahl Story Company, giving it rights to Dahl’s classic characters and stories. And it acquired Scanline VFX, giving it an in-house visual effects team that can be used for its own movies and shows. Until last year’s Dahl deal it hadn’t made any major acquisitions since StoryBots in 2019.
As the streaming landscape gets larger and more competitive, the need to have content and skillsets that allow you to stand out gets even more important.
A version of this story first appeared in the March 30 issue of The Hollywood Reporter magazine.