Netflix Shuts Down More Game Studios After Refocusing Its Gaming Business on Mainstream Audiences

The latest studio closures raise questions about Netflix’s commitment to experimental games and its broader gaming ambitions.

Netflix is reportedly eliminating two more studios as it refocuses its gaming strategy. The latest decision adds to the growing confusion around Netflix’s long-term gaming ambitions, which the company has regularly joined, changed, and seemingly reviewed in recent years.

Game file reports Netflix is dumping Los Angeles-based Nite School Studio, which it bought in 2021, and Helsinki-based Moonloot, which was made in 2022. Night School merely launched a new game six weeks ago, so the closures are not just a matter of some projects being older than others, but Netflix is making greater strategic decisions.

The latest release from Nite School is a short first-person horror game called Unhinged that can be streamed directly from Netflix on compatible screens. The game is an example of the kind of experience that has become synonymous with the Netflix gaming strategy, where users can access games through the streaming service and in some cases use their phones as controllers.

That means Netflix subscribers can check out games without a dedicated console. However, the control-by-phone approach can be far more limiting than a traditional controller. Depending on the game, users may be confined to touch screen controls and a few large virtual buttons, which can make the experience less appropriate for more complicated or mechanically demanding games.

The cuts appear to be linked to Netflix’s focus narrowing. According to sources, the corporation has turned its focus to kid games, party experiences, story-driven games, and projects with obvious consumer appeal. As an example of the sort of bigger property Netflix is hoping to build, it cited a recently published FIFA game.

It seems Netflix is willing to give up smaller experimental games for bigger audiences.

A Netflix spokesperson said the company is responding to the studio closures by aiming to be more focused in its execution and is making organizational changes to align its games business with those aims. That statement seems to suggest Netflix isn’t giving up on gaming altogether.

Rather, the company appears to be pivoting away from smaller, more experimental projects that would have a hard time gaining a foothold among its vast subscriber base. The challenge for Netflix is that most users don’t open the service with the intention of finding a game to play.

Netflix needs to entice customers to play games in a setting that is primarily designed for TV series and movies, as opposed to gaming-specific platforms. So a game needs to tell you immediately why it’s worth playing, whether it’s because of familiar characters or an established property or because it ties into a hot Netflix series.

This could account for the increasing pressure on established characteristics and easily accessible genres. A game based on Stranger Things, for example, has an initial edge in that Netflix viewers already know the brand and are more inclined to try out a related game.

So this method could potentially allow Netflix to tap into a much broader audience than releasing an experimental title from a no-name studio. But it does bring up questions about how the company’s gaming strategy can digest new and unconventional enterprises.

Netflix’s gaming strategy is still evolving, despite vows it won’t be leaving.

Netflix has often said it remains committed to gaming even if its strategy changes. The company has dabbled with several types of games and delivery methods, but recent studio closures show it’s becoming more selective about where it spends. Grand Theft Auto VI could be coming to Netflix, one of the most ambitious plans the streaming giant has tried to put in motion.

The move might possibly put Netflix’s gaming service in front of a large audience; however, it’s unclear whether this is a bigger commitment to gaming or just a gimmick to drive more people to the site. But a big series like Grand Theft Auto has the advantage that the brand itself may draw attention.

Netflix doesn’t have to persuade fans to be interested in a new game; it can just draw on a worldwide popular series. That distinction may be more important when Netflix reinvents its game portfolio. Rather than trying to slug it out with the giants across all genres, the company might be targeting games that don’t require a lot of explanation and can swiftly win over a large portion of its existing fan base.

Future Netflix games could be more franchise-focused and mainstream.

The new shutdowns could be another piece of Netflix’s ongoing puzzle to figure out what gaming means for its streaming environment. Some of these smaller experimental releases may have creative worth, but if they only bring in a few members, Netflix may have a hard time justifying sustaining them permanently.

The company’s huge user base presents a unique opportunity but also a major challenge. Netflix needs games that can cut through thousands of hours of TV and film content and compel people to change their regular viewing patterns. That might push the firm toward party games, kids' games, narrative games, and recognizable brands with obvious appeal.

That plan may increasingly rely on games based on popular Netflix shows. Netflix doesn’t appear to be completely giving up on games. The company appears to be tightening its focus and showing more interest in projects that have the potential to reach a broad audience. The end of Nite School Studio and Moonloot shows how quickly priorities may change.

It’s not clear whether this more careful approach will work in the end. Netflix has been moving its gaming strategy all along, and the fact that it is testing it out now shows that it is still figuring out a model that fits nicely into its streaming business. But current changes could mean worse things in the future for weird or experimental Netflix games, at least for developers and smaller studios.