Netflix confirms move into video games as its growth slows

Netflix reported its worst slowdown in subscriber growth in eight years as people emerged from their pandemic cocoons. But it has an answer to that: Video games.

On Tuesday, the streaming giant announced plans to begin adding video games to its existing subscription plans at no extra cost. It didn’t release details except to note that it will initially focus on mobile games.

The confirmation of the long-anticipated gaming expansion came in conjunction with the release of the latest Netflix earnings report.

That financial breakdown showed the video service added 1.5 million subscribers during the April-June period. That’s slightly better than the modest increase that management forecast after the service stumbled to a sluggish start during the winter months, but still far below its growth rate in recent years.

The 5.5 million subscribers that Netflix gained through the first six months of this year marks its weakest first-half performance since 2013 — a time when the company was still rolling out more original programming instead of licensing old TV series and movies.

Now Netflix is taking another leap by offering video games. The Los Gatos, California, company telegraphed the move last week when it disclosed the hiring of a veteran video game executive, Mike Verdu, to explore potential opportunities in another field of entertainment.

“We view gaming as another new content category for us, similar to our expansion into original films, animation and unscripted TV," Netflix wrote in a Tuesday letter to shareholders.

Despite this year’s growth slowdown, Netflix remains by far the world’s biggest streaming service in an increasingly competitive field that includes Walt Disney Co., HBO, Amazon and Apple. Netflix finished June with 209 million worldwide subscribers.

Netflix’s heft also has produced steady profits. The company earned $1.35 billion, or $2.97 per share, nearly doubling from the same time last year. Revenue rose by 19% from last year to 47.3 billion.

But the lackluster first-half numbers are a dramatic reversal from last year, when government-imposed lockdowns across the world thrust people into binge-watching frenzies while corralled at home. Already the world’s largest video streaming service when the pandemic began in March 2020, Netflix picked up 26 million subscribers during the first half of last year. .

While no one expected Netflix to sustain that breakneck pace, the drop off in subscriber growth this year has been more severe than anticipated. Netflix shares have fallen by about 10% from their peak of $593.29 six months ago. The shares edged up slightly in extended trading after Tuesday’s news came out.