Netflix to expand into cloud gaming, opens new studio in Southern California

At TechCrunch Disrupt, Netflix VP of Gaming Mike Verdu dropped two bits of news about the streaming giant’s foray into games. Verdu said that Netflix is “seriously exploring a cloud gaming offering.” The company will also open a new gaming studio in Southern California.

“It’s a value add. We’re not asking you to subscribe as a console replacement,” Verdu said on stage. “It’s a completely different business model. The hope is over time that it just becomes this very natural way to play games wherever you are.”

Google’s Stadia and Amazon’s Luna have made the same play, attempting to peddle video games that people can play even if they don’t have an expensive gaming computer or coveted console. But these services have struggled to attain mainstream user adoption. Google recently said that it will shut down Stadia in January.

“While Stadia’s approach to streaming games for consumers was built on a strong technology foundation, it hasn’t gained the traction with users that we expected so we’ve made the difficult decision to begin winding down our Stadia streaming service,” Stadia VP and GM Phil Harrison wrote in a blog post.

Verdu thinks these products struggled due to their business models, not the technology itself.

Mike Verdu, VP of Games at Netflix speaks about “whether game streaming can go mainstream” at TechCrunch Disrupt in San Francisco on October 18, 2022. Image Credits: Haje Kamps / TechCrunch

“Stadia was a technical success. It was fun to play games on Stadia,” Verdu said. “It had some issues with the business model, sure.”

Both Stadia and Luna have dedicated controllers — but Verdu was reticent to say whether we can expect a Netflix gaming controller in the future.

He did reveal, though, that Netflix is stepping up its game development by opening an internal studio in Southern California. This is the company’s fifth studio — just last month, Netflix set up shop in Helsinki, Finland with a former Zynga GM at the helm. Others include Boss Fight Entertainment, Night School Studio and Finland’s Next Games, which are each designed to develop games catering to different tastes.

The new California studio will be led by Chacko Sonny, the former executive producer on “Overwatch.” At Blizzard Entertainment, “Overwatch” was a massive success, netting billions of dollars. Sonny announced his departure from Blizzard last year in the wake of an SEC probe regarding sexual harassment and discrimination at the dominant gaming company.

“He could have done anything, but he chose to come here,” said Verdu. “You don’t get people like that coming to your organization to build the next big thing in gaming unless there’s a sense that we’re really in it for the long haul and in it for the right reasons.”

Since it announced its foray into gaming, Netflix has 14 games in development in its own studios and has 35 games on the service now. In total, Verdu said it has 55 games “in flight” at present. These games include experiences based on original IP like “Stranger Things,” as well as licensed IP like “Spongebob Squarepants.” Netflix is also developing original games.

We hope over time that the balance is like, 50% Netflix IP,” Verdu said.

The company still considers itself in the very early stages of its gaming initiative but hasn’t ruled out expansions beyond mobile — though we understand it won’t be heading to the console or VR at this point.

The news of the gaming studio launch and cloud gaming plans arrives as Netflix is announcing its Q3 earnings, which sees the streamer beating expectations with the addition of 2.41 million subscribers, bringing the total to 223.09 million. Netflix had forecast a net gain of only 1 million subs in the third quarter. The company also reported earning $7.93 in revenue in Q3 2022, whereas analysts predicted $7.85 billion.

Update, 10/18/22, 5:54 pm ET to clarify the 14 titles are “in development,” not “developed.”