Economists usually define leisure in contrast to two other uses of time: work and necessity (e.g. The focus on leisure, rather than “premium video,” is important. This includes watching content on other streaming services, linear TV, DVD or TVOD but also reading a book, surfing YouTube, playing video games, socializing on Facebook, going out to dinner with friends or enjoying a glass of wine with their partner, just to name a few.” - Netflix IR “As discussed in our Long-Term View, we compete with all the activities that consumers have at their disposal in their leisure time.
#1: Why Netflix Wants to Enter Gaming (Beyond the Money)įor years, Netflix has identified its competition as “leisure” at large: This essay will cover four areas: (1) Why Netflix wants to enter gaming (beyond the money) (2) The challenges Netflix faces when entering gaming (3) What Netflix seems to be doing and (4) Where this might be going and when.
With this in mind, and as someone who previously helped operate several SVODs and now invests in and produces games, I thought it was time to revisit the topic of Netflix and gaming. In other words, gaming is likely to be ~$180B in 2021, while video will exceed $650B. And while it’s common to hear that “gaming is now four times the size of the global box office,” the box office is less than 1/15th of total video revenues globally.
This doesn’t sound like the time for the famously focused, streaming “OG” to expand into video gaming. This meant the gap between Netflix (210MM) and its next closest competitor had also reached a new record low. During the second quarter, Disney’s streaming business (which spans four different SVODs and therefore includes some double/triple counting) reached nearly 175MM subscriptions. Internationally, Netflix had its smallest increase in subscribers since 2014 (1.5MM). In the United States and Canada, the company lost over 400,000 subscribers combined (this was only the second time UCAN shrunk, with the company losing 126,000 in Q2 2019). For example, it was also Netflix’s worst-ever quarter in terms of subscriber growth. Q2 2021 was notable for a few other reasons. During the company’s Q2 2021 earnings call, Hastings confirmed Netflix had hired its first-ever VP of gaming, and also began to unveil how the video streamer would enter video gaming. Three years later, Netflix has “officially” entered gaming. But Fortnite, as an instantiation of social gaming, is Netflix’s most threatening competitor. (Obviously, the tweet was being deliberately provocative, too). That’s clearly Disney, followed by HBO Max and probably Amazon Prime Video. Fortnite isn’t Netflix’s largest, primary, or most day-to-day competitor. Later that year, I tweeted that “ Fortnite is Netflix’s most threatening competitor.” (41 days later, Netflix CEO Reed Hastings mentioned Fortnite for the first time, writing in his Q4 2018 investor letter, “We compete with (and lose to) Fortnite more than HBO.”) In 2018, I released the third entry in my “ Netflix Misunderstandings” series: “ Netflix Isn’t Being Reckless, It’s Just Playing a Game No One Else Dares.” In it, I argued that while Netflix was unlikely to pursue live sports, live news, or ads for “at least a decade,” a nearer-term push into gaming felt inevitable given the company’s culture and growing scale.