Business of Esports TV: Gaming with Netflix

(Podcast 135)

In this segment, we discuss how Netflix is stepping into the gaming space by launching a gaming subscription service.

The Business Of Esports brings you news, debates, and all the information you need to know about the gaming sector, the world’s fastest-growing market. With Paul “The Profit” Dawalibi leading the charge, and a variety of special guests, BoE TV is the only place to find insider information on the esports industry!

Check out the full podcast here:

Paul Dawalibi 41:09
Guys. This was a big story. And it was a report that came from Reuters. And the headline here is Netflix planning to enter the gaming industry with subscription based gaming service. So we had talked on previous podcasts about Netflix, showing interest in the gaming market wanting to potentially get into the gaming market. Obviously, they’ve done gaming shows. Now, it seems to be all but confirmed, at least, the rumors seem to come from a very legitimate source here that they will have an unlimited, essentially games offering for a monthly fee, as with you know, the typical Netflix subscription. And, and the only thing else out there really that looks and feels like that today, guys, correct me if I’m wrong is like an Xbox game pass. But this is I found really interesting. Zach, I know you had you know, as we were talking before, before we started recording the podcast. I know you guys have had some interesting thinking around games like all you can eat games subscriptions. So curious to get your thoughts on Netflix getting into this potentially, and and how it fits with GG circuit?

Unknown Speaker 42:29
Yeah, so the other one that I think that land centers ask us about a lot is that Ubisoft has also has like a past that you can buy that gets a lot of their titles, if not all of them under one subscription. And so a lot of centers will say, can’t we just buy that for all the PCs, right, and then have that for each of the PCs? You know, the one key that I see in all of this is that a lot of these, it’s going to be like herding cats for Netflix, right? Like we all know, what it’s like to try to track down someone at Valve or steam to work with them on something right like, and some of the publishers are easier to work with than others, but money talks, right? Like where the money funnels into the system. And then the number, the dollar number that funnels in a lot of times is what’s going to probably move the needle with some of those publishers. So, you know, my thought is can Netflix get, I don’t know what the price point will be. But 10 or 15, or 20 bucks can be much more than that, right? If somebody puts a credit card, and we all know, we’ve got those subscriptions for all the other streaming services, I got eight of them that are all like between five and $12. Right? But so that’s the magic point, can you take that from a million or 5 million or 10 million gamers to start and get somebody like Activision Blizzard, who were extremely close to chest with their IP extremely hard to work with. For bigger projects like this, like, you got to go sign one of those publishers, the hardest ones first, right and go to market with them. So that’s the biggest thing for us. We’ve also done like, we’ve done stuff in our network where we’ve made battlefield available on licenses with working with EA to all of our land centers in the network where they didn’t have to buy the game, the players didn’t have to buy the game and they just went to a land center launch the game and could play. They would be like GG circuit 102 would be their player name, right. And then the next time they log in, they get a different one and somebody sold their armor or whatever. And like eventually they get frustrated they buy the game. That’s the whole purpose. Right? So we’ve done that before. It’s technologically not a problem. we’ve dreamed of the day of being able to do that. But we’ve always ran into problems at the publisher always like and we’ve got great contacts and great friends there and they’re like there’s no way we’re getting this by our attorneys. That’s always where it gets stuck.

Paul Dawalibi 44:41
I mean, it makes so much sense for you guys to bundle with your software right like an all you can eat subscription so that the center’s don’t have to worry about that. I guess, William, my question for you is to Zach’s point, is there a price point at which you think Netflix will be able to get all these publishers on board because I’ve seen this happen with music and movies, right? And the first ones to do it like Apple was notorious Steve Jobs, I think had to practically, you know, beg and plead to get all these music publishers sort of on board with Apple Music originally. And it was not easy, especially being the first. What do you think Netflix will hit a reasonable price point here? And do you think they’ll be able to get all the publishers under? Well,

William Collis 45:24
I, I have so many thoughts about this, it could fill a podcast by itself. So I got to be focused here on a couple things. I think I first want to talk up, I’m not super bullish on this working for Netflix. And that is, that’s a hot take. It is not because I am not bullish on a game subscription model. It’s not because of that. I’m extremely bullish on it. I’m not saying athletes can’t make it work. But I wonder the pros and cons column for them. The pros are pretty simple. They have basically everybody in the gaming gaming demographic in most countries already subscribed to Netflix, like I’m guessing if you’re 18 to 30 years old, you have a Netflix subscription right now. That’s why they’re making the Witcher TV show for Netflix. It’s because they know you they know their audience, you’re there, right. So they have a massive, instantaneous ability to put this offering in front of people and convert. And because they’re going to get great scale, I’m pretty confident they can get a great price point for this, right? Because they’re going to be able to rely on a lot of users signed up in the beginning. And if they’ve been able to if they have the scale to negotiate a good price point for movies and TV, right, they’ll probably be able to get a good price point. games I don’t think we’re talking in I mean, I don’t respect that I’m pricing, I think the pricing will be competitive, whatever it is. So I think that’s massive pros, massive pros. So why then William, would you say, well, you’re not you’re not super bullish on this, you’re not like, Oh, my God, this is a homerun. It’s because of two things. One is, I think not everyone assumes Netflix will win in their new markets. Because Netflix was first in this in the in the movie market TV market, right? Netflix is not first here, right? Like and in particular, I think game pass as a competitor cannot be underrated here cannot be underrated. Because once you have one subscription feature for this, I dispute that this is like movies and TV, we’re gonna end up selling it for four or five subscription service, I didn’t have one base, I’m going to cherry pick the other titles in games, because that’s still the offering that’s based on here. So I have real concerns about the entrenched in their competitors. But I have a bigger concern here. And the bigger concern I have is for me to go, oh my gosh, you’re gonna knock this out of the park, this announcement have to be paired with Netflix opening game studio, because Netflix has shown us that the secret to their sustained subscription model is owned content, right. That’s why they spend literally billions of dollars developing content every year. And I find it difficult to believe I find it difficult to believe that after say, Microsoft has just bought Bethesda, right, and walked all that stuff exclusively as a character, their platform that all these other publishers were thinking about their own platforms and what they might do, might let the crown jewels out of the fence for a subscription service. And I think if you see what’s happening with Netflix right now, like Disney clawing back IP to build Disney Plus, I think the gaming space is more advanced. And there’s much more friction for them here than they realize and without their own individual offerings to anchor, I think they’ll have a really great hit out of the gate with probably some expensive, highly paid marketing titles. But I think the ability to sustain is really question. I also sorry, it’s just I want to go one other place. I also want to connect this to the person who should be most terrified by this announcement. And I think there’s an unusual drop. but bear with me, I think if I’m a company that’s most scared about this, it’s epic. And why? Because I think epic just invested tons of money, and is planning to continue to invest tons of money in a store model, right. And my concern is, if this is at the moment where we now have a Netflix coming in, we have game pass, that maybe the store model is really going away that this subscription model is the new model for games in game services. And that the biggest people who are at risk here are the new store models, they’re going to have all the difficulty of building the store business, but they’re going to be on last generations monetization approach, right? Like, I think maybe seeing this Epic Games might wish Hey, we should have been we should have launched to the game streaming service or had streaming elements integrated into it. Hey, well,

Unknown Speaker 49:48
what if we think about this? I love that point because here’s what I think secretly behind the scenes. Okay, this is your data play, right like somebody likes valve. And with steam, or somebody like epic with their store, they have all this data and they know this, I would argue that epic already has a subscription model, alright, you know where I’m going with this because they already know they can sell a few games, right? They sell a few games during the year, they know your login, and they know what you will buy. But they also have been giving away games the whole time. And I don’t see any sign of that stopping. So essentially, like what they’re doing is saying, okay, right now, William buys, like a couple games a year, divide that by 12 months, we give away a bunch of free games along the way, we pay all those game companies for those games, essentially, I wonder if under the hood, that’s what their model is. They’re just monetizing it. And we’ll give you some free games along the way to keep you in our store all the time. You buy a few games, essentially, that’s what you’re doing right? As long as you’re logging into the epic store and spending some money every now and then.

William Collis 50:57
Yeah, I see the point. Just the concern is, you know, the positioning here is like if, like Netflix entering this market, because they have so much market power for exposure to customers, right? Like, literally, anyone who games like I think we’ve all heard subscription service for games before. Because I remember when she says the game’s been around for a long time people are like you should do is to be like, I remember when there was like, was it like, game fly or whatever, where you literally get like the, you know, so like, I think we view it as a, I think Netflix can bring a lot of attention and reinvigorate that model and show that that model makes sense today. And my concern is if you’re steamier, fine, you’re the entrenched ownership store you locked in, you have a more tiser costs a long time ago. But if you’re epic, and you’ve just spent literally hundreds of millions of dollars building a store model. Like Imagine if I were trying to convince you that like I should be doing an online DVD or an online video purchase website today, you would say to me, no, there’s Amazon, they rule that market if you want fixed own content, and everyone else is on streaming, right. And I’m taking that thought a little bit and apply it to the games market where know their steam, they own the main market for people on ownership, there’s the trend clash, and then there and everyone else is gonna go to streaming and I really do think streaming is coming or not streaming, subscription models are coming in a big way. Because of the success of game pass. I just think the industry is awake to it. They recognize how impactful it is for Microsoft. And like it’s difficult to get going and it’s difficult to get right. But I really believe that it’s not just Netflix seeing the power of this and more to the point Netflix doing this is going to scare other people into doing this

Unknown Speaker 52:36
right. And Paul using your moat analogy, is it also a problem that a generation or two, we’ve lived in steam, right? Like our games exist in steam, and that’s why epic has started their store to compete with steam is that like, I don’t want to ever lose my Steam account? Because like what happens to all the games that I have in my Steam account? And now

William Collis 52:57
5000 unplayed. What about World of Goo? I’ve been looking at extension two, right, like that’s still there for me to play if if I want so you can’t leave Civ two that’s a classic. Look,

Paul Dawalibi 53:09
I’ve always said that the more of these stores that pop up or services Alright, and it’s no different in video. If anything, it’s worse for the consumer worse for the gamer, right? It’s just like I now have to check like cuz I have so many subscriptions just for games even right I have game pass. I have you know, 300 state titles on Steam. I have all the freebies I got on epic game store. So like, what if I have a friend that says hey, let’s go play left for dead? I’m like, hold on. Do I own that? Did I get it for free? Is it on game pass? I have to go do like a whole search and I’m I’m the origin I pay for like the origin premiere or whatever and the EA Play in the rain. So like, between all these services, it’s just a mess. And I think it’s nonsense that it’s such a mess. But I just want to push back on Williams point for a second which is I think epic would be able to pivot to an all you can eat service because of their relationship with the developers right i think that’s the crux of those all you can

Unknown Speaker 54:11
they own unreal, and I equated GG circuit to unreal for folks and examples like, like, you know, listen like underneath the hood. A lot of these publishers use the Unreal Engine right so yeah, is that part of their secret sauce?

Paul Dawalibi 54:25
And when I think I push back even harder William is on on the Netflix doing original content because I think you’re right that’s the obvious one right? Netflix does original content for movies, it’s very successful. They do it for TV shows it’s very successful they spend I don’t know that it’s more than a billion dollars now a year producing original content. I just think if they want it to roll their own all you can eat game service. And and the the we all agree the hardest part of this is convincing the developers to come on board with their games. If net in the same breath says and by the way, we’re buying this studio and we’re going to spend $3 billion a year making our own games. If I’m Activision Blizzard are going Whoa, whoa, hold on, you want to put, you know, you want to put Overwatch to next to and Call of Duty next to whatever game you’re spending a billion dollars on No way. Right? And so like I feel like if anything Netflix staying out of the original content space might allow them to bring this to market more successfully. Now that’s not to say two years from now or three years from now, they then can’t roll their own content once that developers are dependent

William Collis 55:38
that argument, Paul, I think is dead argument. And I hear you. But I think like that’s the argument. Like if that argument were true, then why did Netflix go into original content? Right?

Paul Dawalibi 55:49
If they didn’t do it, they won?

William Collis 55:51
No, they didn’t do day one, they didn’t do one. But my point and neither did Apple to Apple,

Paul Dawalibi 55:55
because you don’t want to be seen as a threat. So yeah, ease your way in. You’re the friendly guy consolidating everything. We all work together Kumbaya, and then three years in once you have all the eyeballs, then you roll your own.

William Collis 56:08
See the differences? And I take the point, right, you’re basically saying like, it’s, you know, I take the point. Thing is, I think, the fundamental problem here, the fundamental problem is all the like in that market beforehand, right? The market that you described beforehand, like all the individual TV studios, all the individual video, movie studios weren’t really trying as a core piece of their strategy to do their own distribution. Right. But look at now, every publisher you decide about tell me all the services you subscribe to tell me like, it’s just the publishers recognize that the distribution here because it’s it’s a much more fundamentally core digital product, right? Like, then they never went through the st. Like, they’ve recognized like the industry had an awakening before traditional media, where they shed the pain of having to go to a GameStop to go buy a physical, I’m sorry, GameStop, you know, better they shed the pain of having to go to a retailer to buy like, online, they got there earlier, and they recognize controlling that distribution is powerful. That’s exactly why now you have the publishers going full on it and trying to distribute other people’s games like epic. So I just think like, roleplay the conversation with me, like, your Netflix, I have buyers, I have Fallout five or whatever it is, convinced me to put Fallout five on your service,

Unknown Speaker 57:30
right. But here, I’m going to I’m going to shoot you both down because the other night, I really wanted to watch Indiana Jones. I just had a hankering to watch it again.

William Collis 57:39
Okay, great movie. Which one though? Which one? I was just gonna start the beginning and start Well, there’s one oh my god, like, I’m

Unknown Speaker 57:44
assuming. I’m assuming they’re all online. Right? So I do what everybody does. All right, and follow me out here. I opened up Netflix and I like now. So then I’m like, screw this. I’m not going through everyone. So I get my Google out. And I google it. And I’m like, oh, it used to be this used to be this used to be this used to be is now it’s on Paramount plus, well guess what? Zack, who is not subscribed to Paramount plus yet. So my point is, I think Netflix can launch this and be successful without all of the publishers on it. Because in the end, like there’s not a one size fits all video streamer out there today. Anyway, like, we all subscribe to at least three or four or five different services because the IP spread around you, I don’t know of a day where all the IP exists on one thing, because that’s called a monopoly. And so like, I don’t know that that is a good thing. Anyway. So

William Collis 58:32
let me make this argument more because I’m struggling, I think I think there’s a good point, which is like, the risk here is like, think of your Steam library again, right? And think of like, I’m for everyone, right? Like, it’s like 3% of your Steam library is like 99% of your time played, right? Because, you know, you’re like you play the big marquee games. You buy others you try me again, not really, you know, I’m not really feeling crayon physics this time, you know, maybe in it, right. But like, the point I’m making is the risk. I don’t doubt Netflix can get gaming content. But if they’re just getting all the games, you don’t want to play really, they don’t have a great service. And my fear is I make this argument differently. Our industry has recognized the power of exclusivity for decades, starting with consoles, right? Like, that’s what define like, there’s this notion inherent in the industry of exclusivity and platform control. And again, unless they’re able to get the biggest games, you’re not gonna want to subscribe to the service. This I don’t believe this is like the movie or TV market, where there’s a massive amount of long tail problem content, and tons of people want to go back to 90s 2000s 10s. I think for subscription games to work. Most people pretty much want to play the most recent games. And that’s the difference here. Right? That’s the stuff that gets carved out to other studios in the media model and

Unknown Speaker 59:56
report that William with data from our system is that we have games Seems like we have 2000 titles in our library across our network, right? Like, there are centers that have loaded libraries of all the classic games you could want to play. And they don’t get played. And we all know that, right? Like you all are, like, Let’s go together that new retro bar down the street, they’ve got an original Nintendo, we can blow on the thing. It’ll be so cool. And we’ll sit down and like it’s really cool for a night. Like I the other night, we pulled out GoldenEye, and we just really wanted to play it on the 64. And like, it was in a great experience, we might add a few adult beverages and like it, but like, I didn’t have the urge to pick it up again, the next

William Collis 1:00:36
rock, it’s all remote mines. There’s only only

Unknown Speaker 1:00:40
like, yeah, I mean, like a, you know, Golden Gun. It’s like all of those are great. And we all love thinking about that me about playing it. Like I was frustrated. I was like, like, this is not playing like I play fortnight right? Like, like, I wish I could crouch and build and do some other stuff that new games can. So I think you have a great point in the fact that the latest

William Collis 1:01:03
where where are they going to get the good content? Because you can’t rely on the No, but like, you can’t rely on the long tail content the same way you can. With traditional movies and film you just care. Like everybody. I bet if I told you do you want to watch the best picture? Like I bet there’s a big market for blue in the last 10 years, the best pictures? I don’t think there’s anybody really in gaming, who wants to go back and play like or, like Fallout two, even though it was a really game at its time there on Fallout four. And the market for Fallout two is very small. And guess what it was? It’s gone. Right? Good Old Games. Right. And I think it’s a good business. I don’t rate point.

Unknown Speaker 1:01:40
That’s such a good point. And music. You look at musics the same thing, right? You use movies, right?

William Collis 1:01:46
What What did what did what did Netflix? What did Apple sits over that start like their big thing was getting the Beatles on? And that’s like 5060 years old, you know? But again, can you imagine? Like, well, I’m going I’m going thumbs down on Netflix streaming, I don’t think we have Oregon Trail. Like guys, we got Oregon Trail like that would be the equivalent, right? You know what I mean? Like everyone be like, oh, art and trailer. Remember that was a crazy love this game is to play for hours in your day for an hour to for nostalgia. It’s not the long tail content games not the same. It’s the big new content that anchor services. And that’s the stuff that publishers protect. And that’s my concern that when they have a big marketing budget out of the gate, they’ll get a partner, they’ll buy a couple big things, right. But the ability to sustain this is going to be a struggle, it’s going to be a real struggle. And I think they can get eyeballs. And I think they can get awareness for this market. I think subscription games will be a more important category going forward. Now, I think this might galvanize the category. But I have real concerns about their ability to do it, I really do. Again, I’m not saying they won’t do it there, they have the biggest advantage ever, which is literally every single person who is a gamer will know about this on day one because they log into their Netflix account at night and see an offer for it. Because Netflix has that demo. That’s a huge advantage. But content is king in these industries. And I think the content here is not a one to one parallel with movies and TV.

Paul Dawalibi 1:03:05
Guys, I want to move on I want to get to one other story here. Before I do, I just want to say for our listeners, for our viewers, I would love to get comments from you guys. A on what you think the price point for this Netflix service will be. And B if you think they will be able to get the triple A titles, the latest and greatest. And if if that is something that you would need to see, to subscribe to this service, I would love our listeners views on on those two things.

William Collis 1:03:34
I’m by the live stream and vote team Netflix team not flex like I’m really curious.