You Were OK with Netflix Ads and Password Crackdowns — How About Gaming Microtransactions?

Last April, Netflix co-CEO Greg Peters said there is “not currently” plans to directly monetize its games. “We want to have a differentiated gaming experience,” he said at the time. “Part of that is giving game creators the ability to think about building games purely from the perspective of player enjoyment and not having to worry about other forms of monetization, whether it be ads or in-game payment.”

Now, Netflix Games has a novel idea: Let’s make money.

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According to the Wall Street Journal, Netflix executives have held discussions on how to generate gaming revenue, including ads and in-game payments. Also on the table is charging extra to access the more sophisticated Netflix games.

When reached by IndieWire, Netflix had no comment. A spokesperson pointed us to this line in the WSJ’s story: “Netflix encourages open debate internally on its strategy, which is a key pillar of its culture, and such discussions don’t mean the company will decide to monetize games.”

Netflix’s games are currently free for all subscribers. Of course, the company once famously swore off commercials; it also used to be chill about sharing passwords.

Netflix signaled a push toward bigger-budget games through its licensing of super-popular AAA console and PC game “Grand Theft Auto: San Andreas” — that development or licensing money has to come from somewhere. According to Sensor Tower, “GTA: San Andreas” drove 11 percent of Netflix’s game downloads in 2023.

Among the revenue generating possibilities are in-game microtransactions. A harmless example is letting players pay for cosmetic changes to characters, weapons, and vehicles. Those are an “easy fit” for Netflix, Aaron Jacobson, CEO of developer Zollpa Games (“RoboSquad Revolution”), told IndieWire.

Where “games get in trouble” is in constructing “paywalls that are integral to the game,” he said. “Pay-to-win games are almost never popular, and it’s made worse when you’ve already paid for the game via a subscription service like Netflix.”

In terms of in-game ads, Jacobson would personally prefer product placement over pop-ups, but said they wouldn’t “seem out of place” to anyone on an ad-supported Netflix plan. Nor to mobile gamers: the “majority” of them “are used to dealing with ads, or paying to avoid them,” he said.

Jacobson sees no real problem with what we’ll refer to as Option 3, the upcharge. Go ahead and charge a “subsidized fee” for a game, he said — just do it up front, so it “doesn’t feel like a bait-and-switch.”

Screenshot from “Grand Theft Auto: San Andreas”
Screenshot from “Grand Theft Auto: San Andreas”

Netflix Games launched in fall 2021 to a slow start, but adoption is picking up pace with 81.2 million global downloads last year, Sensor Tower confirmed for IndieWire. That’s triple the 28.7 million downloads in 2022. The market intelligence firm says Netflix’s top game, “Too Hot to Handle: Love Is a Game,” has 7 million downloads. At this writing, none of Netflix’s games generate direct revenue.

Instead, the Netflix Games strategy to-date has centered on increasing engagement with Netflix IP and further reducing the streamer’s industry-best churn rates. According to earlier Sensor Tower data previously shared with IndieWire, while the “Stranger Things: 1984” mobile game peaked with the release of “Stranger Things 4,” the game sustained an elevated performance “far longer” than the show itself.

“Even simple and cheaply made video games allow fans to interact with IP for hours beyond the runtime of any show or film it may derive from,” MoffettNathanson’s lead gaming analyst Clay Griffin wrote in a November 6, 2023 note to clients (and obtained by IndieWire). “Fans may be forced to wait months or even years between the release of new seasons or films set within an IP universe. Games can help sustain them through that wait.”

Netflix has already signaled its intent to wait on games to mature. “We’re in games for the long term,” Netflix CFO Spence Neumann said during the September 2023 Bank of America conference.

Though Neumann said his games investment is “a relatively small percentage” of Netflix’s overall content budget, he also acknowledged how large and lucrative the overall gaming space is. To compete, it costs “a pretty meaningful set of dollars,” he said. Perhaps it is time to claw some of those bucks back.

Jacobson wants to see it done in a responsible way. This isn’t just an opportunity for Netflix to make more money, it’s a chance for the streamer to “set a precedent for how other streaming companies monetize gaming in the future.”

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