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Why Netflix is getting serious about video games

The streaming service could succeed where other entertainment players have failed.

An image of the red Netflix logo on a black background.

Netflix has hired a top Facebook exec to build out its games division.

Image: Netflix

Netflix officially threw its hat in the gaming ring on Wednesday, but the move shouldn't have come as much of a surprise. The company's interest in developing and publishing games has been swirling since at least 2018, when it released the interactive "Black Mirror: Bandersnatch" special. Since then, Netflix has developed several successful series based on popular video games and even launched Stranger Things games for mobile and the PlayStation VR headset.

But news of Netflix's hiring of Oculus VP Mike Verdu, a gaming executive with an impressive track record overseeing mobile game development at companies like Electronic Arts and Zynga, signaled the company was finally serious. We don't know what shape its gaming service will take, but reports peg a launch for 2022 involving a mix of titles Netflix builds itself as well as those from third-party developers, all offered from within the Netflix app.

There's a good reason Netflix wants in on gaming. The attention economy has increasingly organized itself around the most time-consuming and lucrative forms of media in recent years — in other words, video games. With only so many hours in the day and limited ways to monetize that engagement with traditional media, companies are stuck competing for a diminishing amount of ad dollars and subscriber revenue. Games offer a new path.

  • Fortnite, Roblox and the scores of mobile juggernauts each earning multiple billions of dollars per year figured out that the best way to keep people coming back and spending money is to create engaging social spaces and layer digital economies on top. (Or, at the very least, create an addictive loop and give it away for free, monetizing it in other less savory ways.)
  • Traditional TV, structured around milking series and big hits, is ill-equipped to compete with companies actively trying to create a next-generation internet. The metaverse, a "Ready Player One"-style fusion of ecommerce and entertainment, is the stated goal of companies like Fortnite maker Epic and Roblox, and whatever form it takes may make traditional film and TV obsolete.
  • Netflix co-founder Reed Hastings, as early as 2019, cited Fortnite as one of its biggest competitors. "We compete with (and lose to) Fortnite more than HBO," Hastings wrote in that year's shareholder letter.

Netflix needs to diversify its business, and gaming is a great way to do that. Much of Netflix's growth is tied up in subscribers, and the company can't keep adding new paying customers at the same rate forever. Although Netflix saw a boom in subscriptions last year, that growth slowed significantly in the first three months of 2021 as the effects of the pandemic began wearing off.

  • There is a ceiling on the number of people willing to pay a climbing monthly subscription fee, especially given today's overabundance of entertainment services. If Netflix can create an Apple Arcade-style bundle, which Axios earlier this year reported was one potential business plan, the company could make it a complimentary add-on to its existing service and avoid inducing subscription fatigue.
  • Gaming is a good differentiator against other streaming services. Netflix right now competes for attention with video games, YouTube and Twitch, but it still competes for subscribers with the likes of Disney and HBO. Catering to gamers could tilt the scales.
  • Many of Netflix's competitors in TV and film are part of massive conglomerates, all of which have extremely diversified revenue streams across theme parks, telecom subsidiaries and other businesses. Few of those companies with the exception of Sony and Warner Bros. are remotely successful in games.

Netflix has all the ingredients for success. The company changed the way the entertainment industry developed and distributed film and TV, and there's quite a few reasons to believe it could find success in developing and publishing games, too.

  • Netflix built its original content empire on making unorthodox deals with showrunners and filmmakers, offering them more freedom and resources with fewer strings attached compared with traditional studios. As such, it's produced award-winning movies, shows and documentaries, and it's become a trusted and undeniable force in everything from anime to comedy.
  • Netflix's hiring of Verdu is a sign it's more interested in developing mobile hits than big-budget console or PC games. That makes sense. Like Apple with Arcade, Netflix could find success courting small indie developers to make premium games for smartphones while also running in-house development for titles based on its own intellectual property.
  • And Netflix does have a vast well of IP ripe for games. The company is already working with its "Witcher" partner CD Projekt Red on upcoming expansion content for a rerelease of The Witcher 3. It could become more active in developing or producing Witcher spinoff games, as well as games around untapped properties like "The Umbrella Academy," "Narcos" and "Money Heist."

Gaming is a notoriously arcane industry requiring astronomical amounts of money and talent to succeed. Many companies, even those like Amazon and Google with software expertise and vast resources, have failed to replicate the success of even small- to medium-sized developers operating with the experience necessary to navigate the games business. Disney, with Marvel and "Star Wars" at its side, has repeatedly fumbled when trying to translate those media properties into successful games.

It's not certain Netflix will succeed. In fact, it is more likely, given the tech and traditional entertainment industries' track record here, that Netflix will fail. But it is in Netflix's best interest to expand beyond the confines of traditional TV and film if it's to continue growing and maintaining its edge over rivals. It has a mobile app to feature its games, a talent scouting team to find creators to make them and expertise in building big hits out of nothing. Now, it just needs to bring the same ambitions it brought to TV over to gaming. Anything less and Netflix risks letting Fortnite and Roblox win it all.

Protocol | Fintech

Amazon wants a crypto play. Its history in payments is not encouraging.

It missed chances to be PayPal, Square and Stripe — so is this its chance to miss being Coinbase, too?

Amazon wants to be a crypto player.

Image: NurPhoto/Getty Images

The news that Amazon was hiring a lead for a new digital currency and blockchain initiative sent the price of bitcoin soaring. But there's another way to look at the news that's less bullish on bitcoin and bearish on Amazon: 13 years after Satoshi Nakamoto's whitepaper appeared on the internet, Amazon is just discovering cryptocurrency?

That may be a bit unkind, but the truth is sometimes unkind. And the reality is that Amazon has a long history of stumbles and missed opportunities in payments, which goes back more than two decades to the company's purchase of internet payments startup Accept.com.

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Owen Thomas

Owen Thomas is a senior editor at Protocol overseeing venture capital and financial technology coverage. He was previously business editor at the San Francisco Chronicle and before that editor-in-chief at ReadWrite, a technology news site. You're probably going to remind him that he was managing editor at Valleywag, Gawker Media's Silicon Valley gossip rag. He lives in San Francisco with his husband and Ramona the Love Terrier, whom you should follow on Instagram.

Over the last year, financial institutions have experienced unprecedented demand from their customers for exposure to cryptocurrency, and we've seen an inflow of institutional dollars driving bitcoin and other cryptocurrencies to record prices. Some banks have already launched cryptocurrency programs, but many more are evaluating the market.

That's why we've created the Crypto Maturity Model: an iterative roadmap for cryptocurrency product rollout, enabling financial institutions to evaluate market opportunities while addressing compliance requirements.

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Caitlin Barnett, Chainanalysis
Caitlin’s legal and compliance experience encompasses both cryptocurrency and traditional finance. As Director of Regulation and Compliance at Chainalysis, she helps leading financial institutions strategize and build compliance programs in order to adopt cryptocurrencies and offer new products to their customers. In addition, Caitlin helps facilitate dialogue with regulators and the industry on key policy issues within the cryptocurrency industry.
Protocol | Enterprise

How Google Cloud plans to kill its ‘Killed By Google’ reputation

Under the new Google Enterprise APIs policy, the company is making a promise that its services will remain available and stable far into the future.

Google Cloud CEO Thomas Kurian has promised to make the company more customer-friendly.

Photo: Michael Short/Bloomberg via Getty Images 2019

Google Cloud issued a promise Monday to current and potential customers that it's safe to build a business around its core technologies, another step in its transformation from an engineering playground to a true enterprise tech vendor.

Starting Monday, Google will designate a subset of APIs across the company as Google Enterprise APIs, including APIs from Google Cloud, Google Workspace and Google Maps. APIs selected for this category — which will include "a majority" of Google Cloud APIs according to Kripa Krishnan, vice president at Google Cloud — will be subject to strict guidelines regarding any changes that could affect customer software built around those APIs.

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Tom Krazit

Tom Krazit ( @tomkrazit) is Protocol's enterprise editor, covering cloud computing and enterprise technology out of the Pacific Northwest. He has written and edited stories about the technology industry for almost two decades for publications such as IDG, CNET, paidContent, and GeekWire, and served as executive editor of Gigaom and Structure.

Amazon job opening points to plan to accept crypto payments

The news sparked a rally in the values of bitcoin and other cryptocurrencies.

Amazon may be planning to let customers pay for orders with cryptocurrencies.

Photo: David Ryder/Getty Images

Amazon is looking to hire a digital currency and blockchain expert suggesting a plan to let customers accept cryptocurrencies as payments.

The tech giant's job opening says Amazon is looking for "an experienced product leader" to help develop the company's "digital currency and blockchain strategy and roadmap" Amazon is looking for product leader with expertise in blockchain, distributed ledger, central bank digital currencies and cryptocurrency.

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Protocol | Policy

Big Tech tried to redefine terrorism online. It got messy fast.

The Global Internet Forum to Counter Terrorism announced a series of narrow steps it's taking that underscore just how fraught the job of classifying terror online really is.

Erin Saltman is GIFCT's director of programming.

Photo: Paul Morigi/Flickr

A little over a month after the Jan. 6 riot, the tech industry's leading anti-terrorism alliance — a group founded by Facebook, YouTube, Microsoft and Twitter — announced it was seeking ideas for how it could expand its definition of terrorism, which had for years been more or less synonymous with Islamic terrorism. The group, called the Global Internet Forum to Counter Terrorism or GIFCT, had been considering such a shift for at least a year, but the rising threat of domestic extremism, punctuated by the Capitol uprising, made it all the more clear something needed to change.

But after months of interviewing member companies, months of considering academic proposals and months spent mulling the impact of tech platforms on this and other violent events around the world, the group's policies have barely budged. On Monday, in a 177-page report, GIFCT released the first details of its plan, and, well, a radical rethinking of online extremism it is not. Instead, the report lays out a series of narrow steps that underscore just how fraught the job of classifying terror online really is.

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Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

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