Filed Under: Business

Netflix makes games? Five gaming investments that have yet to pay off

By , ,

The video game industry experienced a massive boom during the COVID-19 pandemic, but then Americans spent 13% less on gaming in the second quarter of this year from the same period a year ago and more time outside. Consumer spending has also been taking a hit amid worries about the state of the economy. Still, tech giants have been shelling out billions of dollars recently to buff their gaming offerings. We’re digging into some of the massive investments that have yet to pay off in this week’s Five for Friday.

#5: Netflix Games?

Netflix’s status as one of the top streaming companies doesn’t raise many questions, but its foray into gaming might. The streaming giant quietly launched gaming in November of last year. It was so quiet that less than 1% of users have even downloaded a game. The company isn’t saying how much it has spent on the venture, but it did pay $72 million to buy Next Games, the company behind a Stranger Things puzzle game apparently no one plays. This isn’t Netflix’s first try in the gaming space either. Back in 2011, it attempted to separate the DVD-by-mail business from its streaming platform, rebranding it as Qwikster. They planned to add video games to that service to compete with GameFly, but backlash at the pricing structure forced the company to scrap the plan shortly after the announcement.

#4: Sony buys Bungie

Sony makes all types of electronics but the brand has now become synonymous with its Playstation consoles. Despite its heavy investment in gaming, in the second quarter, the company reported a 2% loss year over year in its gaming division, while operating profits tanked almost 37%. Sony recently paid $3.6 billion for Destiny-maker Bungie as its competition has been scooping up a number of high profile AAA developers and has also expanded its cloud gaming platform so more content could benefit the service in the long run. Meanwhile, the PS5 has been on the market for nearly two years but semiconductor shortages have limited supply, eating away at the bottom line.

#3: Take Two goes mobile

Mobile gaming is incredibly popular. In fact, analysts say more than two billion people worldwide play games on their phones and tablets. So it makes sense that PC and console game publisher Take Two Interactive would pay $12.7 billion for mobile behemoth Zynga. Take Two has been making a killing in recent years off microtransactions in games like Grand Theft Auto online. But its stock is down 50% this year as it still hopes to make waves with the Words with Friends and Farmville developer.

#2: Meta into the Metaverse

Back in 2014 when Facebook was still Facebook, the company spent $2 billion to buy VR headset maker Oculus. The move became part of a broader strategy to be at the forefront of the metaverse, even prompting the company to change its name to Meta. But Meta is having a rough go of it, posting a revenue loss in the second quarter of this year, its first since going public. And the company’s Reality Labs took a $2.8 billion loss in the quarter. And while accessibility to the VR headset has been a big selling point, Meta recently announced it will be increasing the price by $100 due to increased production and shipping costs.

#1: Microsoft’s gotta catch ‘em all

Microsoft’s $68 billion purchase of Call of Duty and World of Warcraft publisher Activision Blizzard still faces regulatory scrutiny. And now that record price for a video game acquisition may face some additional questions from investors after the company’s gaming revenue fell 7% in the second quarter. The Xbox maker has been gobbling up studios for years to boost its Game Pass lineup, having spent nearly $80 billion on Activision Blizzard, Zenimax Media and Mojang deals.

SIMONE DEL ROSARIO:

THE VIDEO GAME INDUSTRY SAW A MASSIVE BOOM DURING THE PANDEMIC. BUT AMERICANS ARE NOW SPENDING 13 PERCENT LESS ON GAMING THAN A YEAR AGO AND MORE TIME OUTSIDE. ALL WHILE BIG TECH COMPANIES HAVE BEEN SHELLING OUT BILLIONS TO BUFF THEIR OFFERINGS. WE TAKE A LOOK AT SOME OF THE MASSIVE INVESTMENTS THAT HAVE YET TO PAY OFF IN THIS WEEK’S FIVE FOR FRIDAY.

NETFLIX’S DISMAL SHOWING COMES IN AT NUMBER 5. THE STREAMING GIANT QUIETLY LAUNCHED GAMING IN NOVEMBER OF LAST YEAR. JUST HOW QUIET? LESS THAN 1% OF USERS HAVE EVEN DOWNLOADED A GAME. NETFLIX ISN’T SAYING HOW MUCH THEY’VE INVESTED SO FAR, BUT THEY DID PAY $72 MILLION TO BUY NEXT GAMES, THE COMPANY BEHIND A STRANGER THINGS GAME APPARENTLY NO ONE PLAYS.

SONY IN Q2 REPORTED A 2 PERCENT LOSS YEAR OVER YEAR IN GAMING SALES, WHILE OPERATING PROFITS TANKED ALMOST 37%. THAT’S WHY ITS ACQUISITION OF DESTINY MAKER BUNGIE IS NUMBER 4. SONY PAID $3.6 BILLION IN HOPES OF “NO SCOPING” THE COMPETITION. THEY EVEN RECENTLY EXPANDED THEIR OWN CLOUD GAMING. AND THE PS5 HAS BEEN ON THE MARKET FOR NEARLY 2 YEARS, BUT CHIP SHORTAGES HAVE LIMITED SUPPLY, ALSO EATING INTO ITS NUMBERS.

TAKE-TWO INTERACTIVE’S $12.7 BILLION PURCHASE OF MOBILE GAME MAKER ZYNGA COMES IN AT NUMBER 3. MORE THAN 2 BILLION PEOPLE WORLDWIDE PLAY MOBILE GAMES. I’M TOLD WE CALL THEM “CASUAL”. THE PUBLISHER BEHIND GRAND THEFT AUTO HAS BEEN RAKING IN DOUGH THROUGH MICROTRANSACTIONS ON PC AND CONSOLES, BUT THEIR STOCK IS DOWN 50% THIS YEAR. THEY’RE HOPING TO MAKE WAVES WITH THE WORDS WITH FRIENDS AND FARMVILLE MAKER. GOSH REMEMBER FARMVILLE INVITES? MAN FACEBOOK USED TO BE WILD.

SPEAKING OF FACEBOOK, NUMBER TWO IS THE COMPANY NOW KNOWN AS META’S $2 BILLION DEAL TO BUY VR HEADSET MAKER OCULUS. META IS HAVING A ROUGH GO OF IT, POSTING A REVENUE LOSS IN THE SECOND QUARTER OF THIS YEAR, ITS FIRST SINCE GOING PUBLIC. WITH ITS BIG PLAY IN THE METAVERSE, THE COMPANY’S REALITY LABS TOOK A $2.8 BILLION LOSS. THEY INCREASED THE PRICE OF THE HEADSET BY 100 BUCKS TOO, CITING PRODUCTION AND SHIPPING COSTS. YIKES.

BUT OUR NUMBER ONE IS MICROSOFT’S $68 BILLION PURCHASE OF CALL OF DUTY AND WORLD OF WARCRAFT DEVELOPER ACTIVISION BLIZZARD. THE DEAL STILL FACES REGULATORY SCRUTINY, AND IT’S A HUGE PRICE TAG CONSIDERING MICROSOFT’S GAMING REVENUE FELL 7% IN THE 2ND QUARTER. THE XBOX MAKER HAS BEEN GOBBLING UP STUDIOS FOR YEARS TO BOOST ITS GAME PASS LINE UP. WITH NEARLY 80 BILL ON THE TABLE FROM THREE MAJOR ACQUISITIONS, THEY GOTTA FIGURE OUT HOW TO NERF THOSE LOSSES.

ALL THAT SAID, VIDEO GAMES STILL MAKE MORE REVENUE EVERY YEAR THAN HOLLYWOOD AND THE MUSIC INDUSTRY COMBINED. BUT, HEY IF IT’S HURTING THE BOTTOM LINE, I’M GONNA TELL YA ABOUT IT. IT’S JUST BUSINESS. AND THAT’S YOUR FIVE FOR FRIDAY. I’M SIMONE DEL ROSARIO. SEE YOU NEXT WEEK.

The video game industry experienced a massive boom during the COVID-19 pandemic, but then Americans spent 13% less on gaming in the second quarter of this year from the same period a year ago and more time outside. Consumer spending has also been taking a hit amid worries about the state of the economy. Still, tech giants have been shelling out billions of dollars recently to buff their gaming offerings. We’re digging into some of the massive investments that have yet to pay off in this week’s Five for Friday.

#5: Netflix Games?

Netflix’s status as one of the top streaming companies doesn’t raise many questions, but its foray into gaming might. The streaming giant quietly launched gaming in November of last year. It was so quiet that less than 1% of users have even downloaded a game. The company isn’t saying how much it has spent on the venture, but it did pay $72 million to buy Next Games, the company behind a Stranger Things puzzle game apparently no one plays. This isn’t Netflix’s first try in the gaming space either. Back in 2011, it attempted to separate the DVD-by-mail business from its streaming platform, rebranding it as Qwikster. They planned to add video games to that service to compete with GameFly, but backlash at the pricing structure forced the company to scrap the plan shortly after the announcement.

#4: Sony buys Bungie

Sony makes all types of electronics but the brand has now become synonymous with its Playstation consoles. Despite its heavy investment in gaming, in the second quarter, the company reported a 2% loss year over year in its gaming division, while operating profits tanked almost 37%. Sony recently paid $3.6 billion for Destiny-maker Bungie as its competition has been scooping up a number of high profile AAA developers and has also expanded its cloud gaming platform so more content could benefit the service in the long run. Meanwhile, the PS5 has been on the market for nearly two years but semiconductor shortages have limited supply, eating away at the bottom line.

#3: Take Two goes mobile

Mobile gaming is incredibly popular. In fact, analysts say more than two billion people worldwide play games on their phones and tablets. So it makes sense that PC and console game publisher Take Two Interactive would pay $12.7 billion for mobile behemoth Zynga. Take Two has been making a killing in recent years off microtransactions in games like Grand Theft Auto online. But its stock is down 50% this year as it still hopes to make waves with the Words with Friends and Farmville developer.

#2: Meta into the Metaverse

Back in 2014 when Facebook was still Facebook, the company spent $2 billion to buy VR headset maker Oculus. The move became part of a broader strategy to be at the forefront of the metaverse, even prompting the company to change its name to Meta. But Meta is having a rough go of it, posting a revenue loss in the second quarter of this year, its first since going public. And the company’s Reality Labs took a $2.8 billion loss in the quarter. And while accessibility to the VR headset has been a big selling point, Meta recently announced it will be increasing the price by $100 due to increased production and shipping costs.

#1: Microsoft’s gotta catch ‘em all

Microsoft’s $68 billion purchase of Call of Duty and World of Warcraft publisher Activision Blizzard still faces regulatory scrutiny. And now that record price for a video game acquisition may face some additional questions from investors after the company’s gaming revenue fell 7% in the second quarter. The Xbox maker has been gobbling up studios for years to boost its Game Pass lineup, having spent nearly $80 billion on Activision Blizzard, Zenimax Media and Mojang deals.

Get ready to rate in…

Community Rating

Community ratings are revealed after you rate the story.

lock

Watch the report to unlock rating

Rate the bias

Keep us honest! Let us know if you thought this video was neutral or biased.

Comments are still pending approval. Rate this story to add your own thoughts below.

Recent Reports