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    Netflix is playing its entry into the video game market smartly by riding on the back of its successful streaming business

    Netflix is smart, according to Phil Spencer, for leveraging its successful streaming business to enter the video gaming market.

    Spencer discussed video games’ continuous growth and how it’s often a forerunner for tech companies in a conversation with Kara Swisher for the New York Times’ Sway podcast. Some software companies, for example, look to games for inspiration.

    Take, for example, Netflix, which recently revealed that it is steadily making inroads into the gaming industry, first by adding mobile games with current Netflix subscriptions and then by acquiring critically renowned companies like Nightschool. Spencer believes that this is the best strategy for the streaming behemoth.

    “I think it’s smart what [Netflix is] doing,” Xbox boss Phil Spencer says. “They’re buying some studios. They’re learning about the creative process of interactive entertainment. And I think it’s a very smart way for them to move into the space.”

    Netflix isn’t quite ready to go head-to-head with Xbox just yet. Netflix is mostly focused on the casual mobile market, which is still a significant business, despite recruiting an ex-EA executive to manage its new games group. Netflix owns the award-winning studio behind Oxenfree and has a library of popular series that could easily be turned into games.

    While the material is expanding, Spencer believes Netflix has a lot of potential because of its cloud and community. “Netflix is certainly cloud-based. Amazon has a cloud service. Google has a true cloud computing capability. But, without content, community, and cloud, I don’t think getting into gaming right now is a good idea — as Netflix has demonstrated.”

    Xbox Game Pass, which has long been dubbed “Netflix for games,” has taken a page from Netflix’s playbook. Spencer does not disagree with this.

    “From a streaming standpoint, it is. I’d say the difference for us is in the business model of — you can buy every game that’s available on the subscription, which is a little different than a music subscription or a movie subscription.”

    Spencer claims that the transactional business is still the most profitable for Xbox, even though subscriptions are expanding faster.

    The Xbox boss also addressed industry themes including the metaverse and Activision’s recent controversies, as well as Xbox’s social network and how it’s focused on games rather than social debate.

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