Streaming giant Netflix Inc (NASDAQ: NFLX) is reportedly contemplating various revenue-generation strategies for its gaming sector, indicating a potential shift in the company's approach to the expanding division.
In recent months, executives at the streaming giant have had discussions about how to generate revenue from its games, reported the Wall Street Journal, citing people familiar with the talks.
Netflix executives are exploring options for monetizing its games, which currently are available free to subscribers. Potential strategies include in-app purchases, charging for more advanced games, or incorporating ads in games for subscribers of its ad-supported tier.
The company has previously adapted policies, such as introducing an ad-based tier and tightening rules on password sharing, balancing customer experience with profitability.
Despite growth in the number of users downloading Netflix games, the figures remain modest. As of October, less than 1% of Netflix's global subscribers engaged with its games daily, the report cited Apptopia estimates.
Netflix, which began its gaming venture in 2021, has acquired several small gaming studios and is creating games based on its original shows and movies. Its most successful original game, "Too Hot to Handle: Love is a Game," has seen significant downloads, as per the report citing Sensor Tower.
In 2023, Netflix saw its game library grow to 86 titles. It plans to more than double it by adding 90 more titles in 2024.
Netflix rolled out a smartphone controller app to play the games on TV. Members on PCs and Macs can play on Netflix.com with a keyboard and mouse.
According to the report, analysts estimate that Netflix has invested approximately $1 billion in its gaming division, compared to its annual budget of about $17 billion for shows and movies.
The company's gaming downloads reportedly saw nearly a threefold increase last year to 81.2 million times from 28.7 million in 2022, signaling growing interest in this sector. Netflix is poised to further expand its gaming budget as it delves into producing console-quality games, as per the report.
Some Netflix executives and investors have reportedly expressed reservations about the gaming division's strategy.