Netflix (NFLX – Free Report) is expanding its presence in the gaming industry by testing its cloud gaming service in the United States, following initial trials in Canada and the U.K. This move is an expansion of NFLX’s mobile gaming efforts, which began in 2021.
The company has been acquiring gaming studios and licensing titles from individual developers, with the goal of making gaming a significant part of its business.
Netflix’s cloud gaming service allows its members to play games on smart TVs and TV-connected devices, such as Amazon Fire TV Streaming Media Players, Chromecast, LG TVs, Nvidia Shield, Roku devices, Samsung Smart TVs and Walmart ONN. The company plans to support more devices over time.
Players use their mobile phones as controllers. NFLX has a dedicated app for iPhone users to use as a game controller, making it easier to play games on their TVs. Games can also be played on Macs and PCs with a keyboard and mouse.
Netflix intends to refine its game-streaming technology and enhance the user experience during the trials as it extends its testing in the United States.
Netflix Boosts Gaming Efforts to Push Subscriber Growth
Netflix’s approach to gaming differs from traditional gaming consoles. The company is not positioning itself as a console replacement but rather as a value addition to its existing streaming service.
NFLX now expects revenue growth to accelerate in the second half of 2023, driven by the launch of the paid sharing initiative and an expanding content offering.
For the third quarter of 2023, Netflix now forecasts earnings of $3.52 per share, indicating an almost 10% increase from the figure reported in the year-ago quarter. Total revenues are anticipated to be $8.52 billion, suggesting growth of 7% year over year and on a forex-neutral basis.
The Zacks Consensus Estimate for the company’s third-quarter revenues is pegged at $8.53 billion, indicating 7.59% year-over-year growth. The consensus mark for earnings increased by a penny over the past 30 days to $3.49 per share.
Netflix has been steadily growing its games library and offerings as a way to offer more benefits to subscribers. Its games portfolio now includes roughly 70 titles.
The company offers its games as part of a Netflix subscription, with many titles based on its popular shows like Squid Game, Wednesday, Black Mirror and more. It has also discussed plans to license games, such as Grand Theft Auto from Take-Two Interactive.
Last month, the streaming giant launched four new games, including Netflix Stories: Love is Blind, Storyteller, Ghost Detective and Vikings Valhalla.
This Zacks Rank #3 (Hold) company has been actively acquiring gaming studios and establishing its own internal game studios to bolster its gaming business. Notable acquisitions include Boss Fight Entertainment, Night School Studio and Next Games. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Netflix’s cloud gaming service competes with other cloud gaming services like Microsoft’s Xbox Cloud Gaming, Nvidia GeForce Now, PlayStation Plus and Amazon Luna.
Shares of NFLX have returned 20.6% compared with the Zacks Consumer Discretionary sector’s increase of 3% year to date. The outperformance can be attributed to an expanding subscriber base and robust content offerings.
It is leveraging games to keep users engaged on its platform amid intensifying competition from the likes of Disney (DIS – Free Report) , Amazon (AMZN – Free Report) and Apple (AAPL – Free Report) . Shares of Disney have declined 2.9% year to date. Shares of Amazon and Apple have returned 54.5% and 37.7%, respectively, on a year-to-date basis.
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