Netflix Co-CEO Ted Sarandos said the company’s “disciplined” push into video games, which began two years ago, has already yielded “a bunch of positives.”
Operating margins, for one thing, have improved at Netflix from 4% to 20% since 2016, Sarandos said during a sit-down at the UBS Media and Communications Conference. Gaming is poised to contribute to that profitability, though Sarandos did not comment directly on the financials of the nascent gaming business. But one long-term incentive to be in the video game space, he said, is increasing subscriber retention and using games as a “bridge” between seasons of shows.
The company has copped to taking a “crawl, walk, run” approach to gaming. It will be some time before it goes head to head with major publishers for top titles, as it does with film and TV originals. UBS analyst John Hodulik asked if Netflix had considered any bold M&A moves to bolster its standing in the gaming sector. Sarandos said a more “disciplined” combination of originals and licensed fare would be more likely than any headline-making transactions.
“They certainly attract a different demographic,” Sarandos said of games. “One of our really popular games we had is our version of Too Hot to Handle. What was great about the game — again, these are small numbers, we’re good with that — was that a bunch of the folks who played that game had not yet seen the show. They had so much fun playing the game that they started watching the show. That’s a really nice IP development we can do, a place to bridge season-to-season engagement with brands.”
There are “a bunch of positives in the business around” gaming, Sarandos said. “We’ve acquired some game studios that produce these originals and we also like our other content verticals, a mix between licensed and original programming.
After coming to market with just a handful of titles, Netflix has steadily expanded to several dozen. Some of its best-known franchises are being adapted for games, a la Too Hot to Handle, and the company licensed Grand Theft Auto for a new game.
