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Netflix’s foray into video games will cost you time and money: Wall Street

By Nivedita Balu and Akanksha Rana

Jul 21 (.) – Wall Street analysts on Wednesday welcomed Netflix’s foray into mobile video games, calling it a sensible move to keep users’ eyes on the screens, though they are concerned about the Significant time and investment it will take to pay off.

In announcing the move along with its quarterly results this week, the video streaming pioneer offered few details about the investment his plans will require, but chief product officer Greg Peters said it will be a “multi-year” effort. which will start out as “relatively small”.

Analysts said that for the initiative, which seeks to attract new users and spark interest among its existing audience, to succeed, it will take a multi-million dollar spend at a time when it is already investing billions of dollars in original movies and series.

Paolo Pescatore, an analyst at PP Foresight, said it will be “a bold and expensive initiative” for the company, requiring considerable investment and time with no guarantees of success.

“Making free games will increase users, but it is not a sustainable business model in the long term,” he added.

The plans come as Netflix faces slow growth in new subscribers following the record high at the height of the COVID-19 pandemic last year. It disappointed markets on Tuesday with an anemic set of subscriber forecasts.

The firm did not offer a timeline on the release of its first video games, saying only that they will be available to subscribers at no additional charge.

“A foray into the world of video games may just sound like a good idea, but it is an important step in Netflix’s efforts to keep an eye on its screens,” said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.

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Forrester analyst Will McKeon-White compared the investment required in the project to Apple’s $ 500 million launch of the Apple Arcade video game subscription service in 2019.

“If Netflix wants to be directly competitive with Apple Arcade, this investment should at least be the pattern to follow,” McKeon-White said.

Netflix spent nearly $ 12 billion on content last year and plans to increase it to $ 17 billion in 2021, as it battles competition from Disney, HBO and others.

He hired former Facebook executive Mike Verdu, a veteran of video game pioneer Atari and Electronic Arts, creator of hits like ‘FIFA’ and ‘Battlefield’ as a video game director.

The global video game market had an estimated value of $ 72 billion in sales last year, although much of it falls on highly successful franchises such as ‘Call of Duty’ or the social gaming platforms Minecraft, Fortnite and Roblox.

“I don’t think video games will become the next revenue stream accelerating Netflix’s growth,” said Jesse Cohen, a senior analyst at Investing.com. “You will have to explore other potential sources, such as live sports broadcasts and advertising.”

(Additional reporting by Tanvi Mehta; edited in Spanish by Carlos Serrano)

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