Netflix acquires first video game studio with Night School Studio deal

The streaming company launched five mobile gaming titles in select European markets as it seeks to diversify its offerings

Netflix's acquisition is in line with its 'storytelling' mantra that has defined the streaming service's strategy, the company said. Reuters

Netflix, the world's biggest streaming company, acquired game maker Night School Studio, marking its first deal within the lucrative gaming sector.

Los Gatos, California-based Netflix said that the acquisition of Night School Studio, which is best known for its supernatural mystery graphic adventure game Oxenfree, is in line with the "storytelling" mantra that has defined the streaming service's strategy. The companies did not disclose the value of the deal.

"Their 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," Mike Verdu, vice president of game development at Netflix, said in a blog post.

Netflix's push into the sector comes as mobile gaming grows in popularity amid social distancing measures necessitated by the Covid-19 pandemic. The mobile gaming market will grow at a compound annual growth rate of 11 per cent to $272bn by 2030, up from $98bn in 2020, according to ResearchAndMarkets.

The category is also bigger than the PC and console markets combined, contributing about 57 per cent of the $173bn global video games revenue last year.

The streaming company, which first outlined its plans to foray into gaming during its second-quarter earnings call in July, will also be focusing on mobile titles and will be offered with member subscriptions.

Netflix said it also launched five mobile gaming titles in select European markets. These will be included in members' subscriptions, "all with no ads and no in-app purchases".

Night School Studio's games will be the first non-mobile titles in Netflix's newly launched portfolio.

Netflix also has to contend with a number of big-ticket names in the gaming space as it seeks to diversify its offerings. Apple – which is a direct competitor to Netflix with its TV+ service – has its Arcade service, while Google has Stadia and Amazon has Luna. Collectively, these American tech companies are called FAANG – Facebook, Apple, Amazon, Netflix and Google.

"Since we are nearly a decade into our push into original programming, we think the time is right to learn more about how our members value games," the company said.

Netflix posted an 87.9 per cent year-on-year surge during the second quarter, adding 1.5 million paid subscribers in three months, exceeding analyst forecasts of one million. Net income hit $1.3 billion, almost $633 million more than the same period a year ago.

The streaming company expects paid net additions of 3.5 million subscribers in the third quarter, against 2.2 million added in the same period a year ago.