This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
Skip to main content
United Kingdom | EN-GB

Add a bookmark to get started

| 2 minutes read

Netflix pushes into gaming - what does this say about the future of streaming?

Did you know that Netflix offers mobile gaming to its subscribers? You might be surprised to learn that Netflix made its first foray into gaming two years ago, albeit with a low take up rate according to the Sunday Times, with "less than 2 million [playing] its games on a daily basis -  not even 1 per cent of users". Notwithstanding this, Netflix is pumping further money into gaming with two streaming games (Oxenfree and Molehew's Mining Adventure) being offered to users in certain countries, including the UK. Netflix intends to focus on "rolling out games linked to its most popular shows" - a seemingly logical strategy to differentiate itself from competitors (if of course they can make it work). 

Yet all this begs the question - what does Netflix's expansion into gaming mean for the future of streaming? Does the investment outside its core business signify a broader trend that streaming business models are being overhauled?  

Under existing subscription based models, the big streamers have historically focussed on increasing the number of users year on year rather than on the profitability of each show. They then typically pay production companies using a "cost plus" model, under which the streamer covers the costs of production and pays an agreed percentage (%) on top, thereby guaranteeing a return for producers. However, according to Vulture, "subscription fees haven't grown fast enough to close the gap" with the costs incurred by streamers to build up their content libraries. This has caused many to question if a SaaS licensing model (SVOD) is the optimal strategy for OTT platforms? Many creators would certainly say "no" - they are paid up front for projects with little to no secondary or residual payments if the shows they make are successful. 

The launch of AVOD (advertising-based video on demand) on streaming services is a response to these challenges. Could AVOD ultimately replace subscription based models? And could it encourage the emergence of alternative pricing models to "cost plus" agreements with production companies? 

In some ways AVOD harks back to the pre-streaming model whereby the more successful the show, the greater the demand from advertisers and therefore the greater the ads revenue generated. Success resulted in greater returns for creators. However that model was on linear TV and digital advertising raises new challenges: how do you grow a large AVOD subscriber base to attract top tier advertisers? And how do you achieve competitive ad rates? Netflix's CPM was apparently very high at first in the USD 45-55 range.  And beyond AVOD, what other licensing models might emerge? Another streaming provider is considering whether to license content to third parties; a move that would reopen licensing revenue after making exclusivity a core pillar of its offering to consumers. 

And while streamers diversify their strategies, what does this mean for creators? Notwithstanding the existential issues posited by rapid developments in AI, actors and writers understandably want a more equitable pay structure for the exploitation of content they create. Could new steaming strategies encourage the provision of more granular viewership metrics to creators? And could new licensing models result in broader industry change? It's unclear how things will play out but what is clear is that the landscape is changing for streamers, creators and consumers alike, and so will the legal and commercial risks and protections that flow from this.