The company was able to increase its chances of success by using data generated from users to better deliver new content. In some ways, the company has been a victim of its own success as it's essentially reached critical mass in most countries, although there is still some opportunity for international expansion. Many have believed that the company's next move will be figuring out ways to increase revenue per user, although this may be complicated by the proliferation of streaming services which makes it harder to raise prices.
However, according to anonymous sources, Netflix is actually looking to expand into videogames and is looking to hire several industry veterans. The company has experimented with interactive shows in the past and used IP from its content to create mobile games. However, this marks a much more aggressive entry into the space.
Some believe that Apple's Arcade subscription service is a model for Netflix. The company, in a statement, didn't confirm or refute the reports but said that it's looking to do more with interactive content. Netflix's founder Reed Hastings has said previously that Netflix's biggest competition is sleep and video games. And of course, the latter is a bigger concern among younger people who the platform may want to attract. The company has also produced content with IP from video games.
Stock Price Outlook
The reflexive reaction to this news is dismissal given that video games are already a mature and competitive industry. However, Netflix deserves the benefit of the doubt as it already pulled off a tricky pivot a decade ago when it started producing its own original content and been more successful than many studios with decades of experience.
Additionally, Netflix has already solved one of the biggest hurdles which is distribution. Netflix's stock price is essentially flat since July 2020 and only up 25% since June 2018. Over that time, it has continued to steadily grow earnings and revenue, giving it a reasonable forward PE of 38.
The company's focus is now on increasing earnings. Rather than raising prices, it looks like the company is attempting to offer a package of video games to subscribers which could be more effective, especially as it will probably offer it free at first to customers and convert some percentage as paying customers.