How Netflix Is Diving Headfirst Into Gaming

Netflix (NFLX -3.92%) is in the business of holding attention. But its leap into gaming begs the question, how will this addition affect the pricing strategy? In this clip from "The Gaming Show" on Motley Fool Live, recorded on March 7, Motley Fool contributors Ryan Henderson, Travis Hoium, and Jose Najarro discuss their thoughts on Netflix's strategy to get into gaming.

Ryan Henderson: Netflix has been pretty vocal that they want to get into gaming, at least mobile gaming, and include that in their subscription offering. One way they've been doing that is they have acquired a studio before, but they will license their intellectual property to basically contracted studios to build the games for it. It's a pretty common practice especially in the gaming world. Last week, they announced that they are acquiring a Finland-based mobile game development studio called Next Games for about $71 million USD. The connection there is that Next Games has developed a Stranger Things mobile game for them in the past and so they have worked together before and, basically, this is them saying, "It feels like you did a really good job on this. There is the potential that you guys can do more for us with some more of our intellectual property so let's just take it in-house." I think right now, it's just a bid. I'm not sure if the acquisition has closed, but I imagine it will. This is, hopefully, another push toward mobile games as a part of their subscription offering. I want to pose this question to you guys which is, what do you think of the strategy from Netflix? Do you think they have a future in mobile gaming? Is that a good route for them? Also, if they started raising prices to their subscription because of mobile gaming, would that upset you?

Travis Hoium: I'll take a quick stab at that. One, if you think about Netflix's business, it's an attention business. They want to have your attention for as many hours per day as possible. If Jose, for example, watches one hour of Netflix this quarter but, next quarter, watches two hours of Netflix a day, Netflix is happy with that. Their content strategy from a TV/movie standpoint is all about, can we offer everybody something that they can watch to keep their attention for as much time of the day as possible? Moving into gaming makes a ton of sense from that perspective because if you're into playing games, you're not watching Netflix at the same time. I think that makes sense. Whether or not they will be able to do it is maybe another question. Just because this is a little bit from a content perspective, like NBC (CMCSA -0.37%) moving into games. It's always like a leap. Games are their own thing and even gaming platforms are often their own thing. A mobile game doesn't necessarily translate to a VR game, which doesn't necessarily translate to a console game. That's where I have a lot of questions from their content strategy perspective. From the pricing perspective, if they were increasing prices to add games, yeah, I personally wouldn't be super happy about that. I don't think that will necessarily be something that we'll directly see unless games become a really big piece of their business and it becomes so big that it's an add-on that's like a Microsoft (MSFT 0.37%) Game Pass-level thing. For the foreseeable future, I think it'll just go into the content library and hopefully people will use it and folks will be happy with it. They will raise prices a dollar or two every couple of years and that will be the pricing strategy. We'll see how that plays out. I'm not convinced that this is going to be a huge business for them long-term. Anyways, what do you think Jose?

Jose Najarro: This one is pretty interesting to me. I mean, it makes sense in theory. Hey, we're going to add another form of entertainment to have you watch more hours on Netflix. Personally, I don't think I've ever heard of any of my friends play any of their games that are out right now. I haven't even tried them either. Then, I was thinking this past week, Netflix announced that they are launching this trivia game and every single day for the full month of March, I believe, every single day is going to be a whole new trivia game and it's going to be an interactive game/show. I think that's where Netflix can take this a little bit further. It's not for them to build and I don't know if this is the direction they're going, but I think this would be the smart way. If any Netflix executives are watching the show, which I'm pretty sure some are, you can really take this idea. But I think for them is, I think I would only play a Netflix game if it was more like a family style. My brother who's across the state, my mother who's across another state, and another friend, we'd team up to play some form of trivia game against another group or family. I think that would bring the interactive-ness. Those styles of games I think will be a great direction and it seems like that's where they are heading. I don't think they should head into building some form of mobile games that we're seeing right now. I think they should focus in game styles, game shows, trivial-style games. I think that can provide great returns in the long-term of things.