Why is Netflix jumping into the cloud gaming market?
Netflix first announced its move into the cloud gaming industry back in November 2021, and it is now starting to test its games in the UK on televisions and computers as it looks to grow the service.
Cloud gaming – sometimes known as gaming on demand or game streaming – allows users to play video games remotely using just a wifi connection. It removes the need for expensive hardware, as the game processing is done via a super computer elsewhere.
“Netflix Games is more than a trial – it’s on track to become a major games platform,” wrote a report published in February by leading media research firm Enders Analysis.
Gareth Sutcliffe, senior games analyst at Enders explained to City PM that Netflix’s foray into game streaming is “a natural progression for them”.
“They need to address the TV audience and they intend to do that without requiring an expensive console which is an enormous barrier to entry for many.”
The streamer is rolling out two games to a “small number” of subscribers in the UK and Canada, according to an announcement made on Monday by Mike Verdu, vice president of games at Netflix.
As of yesterday, users can play the games on televisions, using their phone as a controller, with the games running on PCs and Macs soon.
With Microsoft’s potential acquisition of Activision Blizzard driving the gaming sector towards subscription services, Netflix is in a great position to leverage the subscribers it already has and attract external game developers.
“This limited beta is meant to test our game streaming technology and controller, and to improve the member experience over time,” said Verdu.
Although Microsoft is looking to gobble up gaming giant Activision Blizzard, it has to get past the UK’s competition watchdog first.
The Competition and Markets Authority (CMA) are concerned the acquisition could give Microsoft an unfair advantage in the cloud gaming market
Sutcliffe said Microsoft and Netflix “share a similar vision”, of low cost access to a wide library of games via subscription without the need for expensive hardware.
However, rival Sony “couldn’t be further away from that”, he said, adding that their need to discount PS5 in the UK shows that “lowering cost is vitally important”.
The Sony PS5 console has plunged down by £75 to its lowest ever price this summer – with some retailers selling the device for under £400.
According to Statista, the cloud gaming market in the UK is projected to grow by over 41 per cent from 2023 to 2027.
The CMA have said the UK market for cloud gaming services could be worth over £1bn by 2026 – a similar size to the UK’s revenue from recorded music in 2021.
It marks a step deeper into the gaming industry for Netflix, after it introduced five games for mobile devices in November 2021, including Stranger Things 3: The Game and Shooting Hoops.
However, at the time, media analyst Paolo Pescatore of PP Foresight said “while, the move into games is a logical step it represents a costly bold move”.
“The company will have to dedicate significant resources including time and investment with no guaranteed success but this is a long-term play as Netflix needs to strongly think about retention and engagement.”
He also pointed out that cloud gaming relies on a strong network connection and Netflix “will have to work more closely with all providers in the value chain to avoid latency, buffering and deliver the best games experience at scale”.
The rapidly growing cloud gaming sector is forecast to be worth up to $13.6bn (£10.7bn) globally according to DFC Intelligence, a leading video game market research company.