Netflix has spent the last two and a half years building out its video game division. However, in this editorial I want to go over why I believe Netflix most probably won’t go the Microsoft and Tencent route and swallow game publishers whole.
Netflix Has Smaller Profit Margins Than Microsoft
Let’s start with a very important point: Netflix’s profit margins and cash reserves are a lot smaller than a company like Microsoft. Netflix has just under $8 billion in cash reserves and only brought in a revenue of $8.54 billion in its last fiscal quarter. Now, sure, $8 billion is more than enough to acquire a company like Team17, Atari, tinyBuild or Sega among several other game publishers. However, you would not get a publisher that is Activision-sized for such a price – more like ZeniMax (which is also owned by Microsoft).
Netflix Already Went On A Mini Buying Spree In Late 2021/Early 2022
Okay, stop me if you’ve heard this one. What do Night School Studio, The Roald Dahl Story Company, Boss Fight Entertainment, Next Games, and the animation studio Animal Logic all have in common? You are correct if you said they were all bought by Netflix between September 2021 and March 2022. While not all five acquisitions were related to video games, the point still stands that, within 6 months, Netflix acquired 3 game studios as well as acquiring Spry Fox in September 2022 (roughly a year after Night School Studio). The fact Netflix was able to snatch up so many talented indie devs so quickly shows they are serious about gaming.
Netflix Already Has a Strong IP Portfolio
Now, one criticism some people have of Netflix Games is the lack of many big-name titles. Whilst Grand Theft Auto and Sonic The Hedgehog games are available, Netflix lacks a lot of other notable gaming franchises. Netflix Games is, however, very strong on video game adaptions of Netflix’s popular television shows – with hit shows like Stranger Things and Too Hot To Handle already having multiple games. They also have The Queen’s Gambit, Vikings, Love Is Blind, and Money Heist among other properties. Netflix owns the libraries of comic publisher Millarworld and the written works of the late Roald Dahl as well as the libraries of the four game studios Netflix acquired. So, Netflix has no shortage of IP to turn into hit video game franchises.
Netflix Have Historically Been Builders Rather Than Buyers
Now let’s look at the last point. Netflix has historically focused on building out their own business as well as doing several partnerships over acquisitions. During Netflix’s existence, they’ve only acquired one small comic publisher, the written works of Roald Dahl, four game studios, one children’s show and one animation studio. And, a majority of those acquisitions were done because those assets were looking to sell and Netflix wanted to secure their place in the market. Netflix has also built two brand-new game studios from the ground up. They’ve also hired top talent who helped launch games like Halo, Overwatch, God of War and Gears of War.
What do you think? Do you think Netflix will buy a major game publisher? As always, remember to follow us on our social media sites such as X (Twitter), Threads and Facebook to keep up with the latest news.
