In today’s Exponential Investor:

  • Gruesome but hear me out
  • The crystal ball comes good
  • What next for Netflix?

It’s often said (even by us) that we don’t have a crystal ball. That means we can never really see into the future to predict what’s coming.

The only problem with that is that sometimes we can predict what’s coming. Whilst never certain at the time, there are some instances where it’s so blatantly clear to us that we wonder why no one else sees it.

At that time, that often has us labelled as being some kind of charlatans, but we know that we’re just putting ideas out that fly against conventional wisdom.

After all, that is exactly what we do – and why when we foretell the future, we should revisit those discussions not to pat ourselves on the back (not completely at least) but then to also ask, what next?

Kill Dad, Chop Up Body

Almost to the day four years ago, I wrote an essay for one of our publications here at Southbank Investment Research, titled “Kill Dad, Chop Up Body”.

As gruesome as that title may be, it was in fact a reference to a new show that had appeared on Netflix called Bandersnatch.

Here’s what I wrote back then:

What I have been doing on and off for the last week, is watching, “playing”, the latest Netflix event, Bandersnatch.

Now if you haven’t yet taken the leap “down the hole” I highly recommend it. Bandersnatch is a movie that was released to Netflix globally about a week ago. Except this isn’t your typical movie. You don’t just hit play and sit back for the next couple of hours.

With Bandersnatch you have to make choices throughout the movie. Using your remote you get to certain parts where you have to make a decision. These decisions take you down an alternative path branching out to various storylines, different endings and wildly different events.

It’s the first ever “choose your own adventure” movie of its kind to hit the mainstream. However, the truth is this really isn’t a movie. It’s more a game than a movie. You “play” Bandersnatch rather than just watch it.

It should be noted there’s been a wave of interactive games in this choose-your-own-adventure style format before. These were PC games back in the 80s and 90s that resembled movies. Some of the titles that helped pioneer this genre include Phantasmagoria, Under a Killing Moon and Voyeur.

These were games, not movies, but behaved like a hybrid of the two. Bandersnatch is clearly a movie but with the elements of gameplay. And I don’t know of any other “movie” in the modern era with this kind of sophistication.

However, there’s more to this movie/game experience than you might think.

This is actually the next great leap forward in the “gamification” of entertainment. I expect that Bandersnatch will be the first of many “choose your own adventure” style experiences. These new events put you in the movie more than you’d ever be just sitting and watching.

When watching with our wife she remarked, “This is great for people like me who sometimes zone out during a movie.” And she’s right. It’s viewer engagement on a whole new level.

In fact, I believe this is the early indication that Netflix is turning into an “immersive entertainment” company, rather than just a “streaming service”.

To reinforce this view, Netflix has also just poached Spencer Neumann to fill its CFO role. Neumann is the (now former) CFO of Activision Blizzard, the US$35 billion gaming giant.

I don’t believe this is a coincidence that Netflix has poached one of the gaming industry’s biggest executives. I think it’s going to make an intentional effort to develop more game-style experiences.

This may come in the way of “choose you own adventure” movie/games like Bandersnatch…

It may also come in the way of a full-blown shift into online gaming, taking the fight to Sony and Microsoft who’ve collectively dominated gaming for the last 20 years.

Here’s the thing. Sony’s PlayStation Network has around 80 million active subscribers now. Xbox Live has around 57 million active subscribers.

Interestingly, Netflix alone has as many as Microsoft and Sony combined with 137 million active subscribers. If Netflix were able to deliver a hardware controller for its platform and deliver online games, it’d instantly be the world’s biggest gaming company.

Is it too much of a stretch to see Netflix release a game like through its platform? Not at all. I think this makes near perfect sense for Netflix to pursue. In fact, I’d be shocked if over the next few years it didn’t develop into an online gaming company.

I also wouldn’t be surprised to see it make a strategic acquisition in this space – perhaps a company like Activision Blizzard. The way we consume and deliver entertainment is continuing to evolve. Movies, games, digital experiences, these are all forms of entertainment.

Netflix isn’t just a streaming company, soon it’ll be a gaming company too.

A forecast that was on the mark

It looks as if my prediction was right.

Netflix is absolutely now a gaming company. It has games you can play online. However, and most importantly, it has massively expanded into mobile gaming.

Netflix is a content company: that means that movies, TV, gaming and, in my view at least, “immersive experiences” will be on Netflix’s agenda.

I saw this week that Netflix has now added a modern version of a classic arcade game to its mobile games line-up.

If you’re a kid of the 1980s and 1990s, then the Teenage Mutant Ninja Turtles (TMNT) arcade game will (or should) be familiar to you. It was arguably one of the best side-scrolling arcade games in history (The Simpsons arcade game is certainly up there too).

The modern mobile version is TMNT: Shredder’s Revenge. It combines modern technology with nostalgia-inducing features. When I saw that this was now part of Netflix’s mobile gaming line-up, it solidified my view that Netflix will soon enough be one of, if not the biggest mobile game company in the world. Of course, the company will also have its regular streaming services.

For me it bodes well for Netflix’s relevance and potential into the future.

Moving on into VR and AR

But it then has me thinking… what next?

And for me, it’s all about virtual reality (VR) and augmented reality (AR). What we’re currently seeing hit the consumer tech markets is improved versions of both. In particular, the hardware is getting smaller and more user-friendly.

In fact, the only thing that the market lacks is quality of content and access to content.

My view is that Netflix has pushed the Go button on gaming as expected and that the next natural move will be into VR and AR. If Netflix can move fast enough to corner that market, it is going to be a beast that’s hard to tame.

As has been widely documented, the stock price fell off a cliff from late 2021 to early 2022. Nevertheless, over the last six months or so, Netflix’s stock price has nearly doubled.

Gaming, immersive entertainment, a market starting to get its mojo back… I think the future of Netflix is starting to look a lot brighter. It is certainly one of the “Big Tech” giants that’s worth keeping an eye on.

Until next time…

Sam Volkering
Editor, Exponential Investor