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Netflix Acquires Video Game Developer

The streaming giant Netflix is fueling its push into the video game sector with the acquisition of critically acclaimed developer Night School Studio.

The move is part of a much wider strategy by Netflix to diversify its revenues, particularly as the company faces increased competition from several well-funded companies in the streaming space, including Disney, Amazon, Apple, HBO, and Paramount, among others. As reported in The Licensing Letter in June, Netflix is not only planning on offering a subscription video game service, but is also opening an online merchandise site, offering licensed merchandise linked to its hit shows. (Complete details in the links at the end of this article)

Netflix vice president of game development Mike Verdu confirmed this week the company has acquired the developer Night School Studio, which is best known for its critically acclaimed horror game Oxenfree. The product is very much a narrative driven game, and Netflix is banking on the idea this type of story first approach to game design will fit with the type of content Netflix produces, buys or licenses.

A scene from Oxenfree, a critically acclaimed horror video game from developer Night School Studio.

“Night School’s commitment to artistic excellence and proven track record make them invaluable partners as we build out the creative capabilities and library of Netflix games together,” Verdu said, adding the new partners will work on  “exclusive games designed for every kind of gamer and any level of play. These games will be included in a standard Netflix membership and, apparently, include no microtransactions of any kind.”

Night School Studio says the acquisition gives its team the resources and the source material to do what it does best, which is designing games with complex, compelling narratives. “Night School wants to stretch our narrative and design aspirations across distinctive, original games with heart,” the company said in a statement on its website. “Of course, it’s a surreal honor to be the first games studio to join Netflix! Not only do we get to keep doing what we do, how we like to do it, but we get a front-row seat on the biggest entertainment platform in the world. The Netflix team has shown the utmost care for protecting our studio culture and creative vision.”

The acquisition follows the decision by Netflix to enter the video game sector, which was officially announced in June when the streaming giant said it intends to establish a gaming subscription service similar to Steam, Apple’s Arcade service, or Microsoft’s Game Pass.

As happened with the model of renting movies on CDs, video games are now being downloaded in increasing numbers, and subscription services have become the fastest growing segment of the industry. Just as Netflix drove a spike into the heart of Blockbuster, so too are subscription gaming services taking market share away from struggling physical retailers like Game Stop.

The move by Netflix and other competitors in the space are based on market economics, as global video game revenues are now estimated at a value of approximately $156 billion, and expected to grow quickly to $256 billion by 2025. To put those numbers into perspective, that’s more revenue than movie box office, television, and music combined. The move also comes at a time when the video gaming industry has benefited from a surge in demand from gamers staying at home during the COVID-19 pandemic.

As well, the tech site The Information reported that Netflix is discussing the offering of a bundle of games, similar to how Apple handles its Arcade service, and that Netflix has approached several senior game industry leaders about collaborating on the creation of that subscription service. 

Netflix has some limited experience in the gaming industry, having licensed properties like Stranger Things and the Dark Crystal to video game developers, but the acquisition of Night School now gives the company in-house expertise.

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