A note on Netflix, which may see its game studio count go way up

Not your normal Game File newsletter for reasons explained at the end

When we last left off mid-week, I was reporting exclusive news about how Netflix’s gaming operation was about to be one studio smaller, with the sale/spin-off of Spry Fox. Down from six game studios in 2024 to three.

Today came the news that Netflix’s game studio count could get much larger.

This morning, Netflix announced an agreement with Warner Bros. Discovery for the streaming giant to purchase WBD’s streaming and studios operation. Netflix’s $80 billion bid was largely touted as a chance to absorb Warner Bros.’ movie studios, HBO and the HBO Max streaming platform.

The purchase will also include WB Games, reps for Netflix and WBD confirmed to Game File (and others) after the announcement.

WB Games includes Avalanche Software (Hogwarts Legacy), Rocksteady (Batman: Arkham), TT Games (Lego Star Wars, Lego Batman) and Netherrealm (Mortal Kombat). Those are all heavy-hitting studios that specialize in premium games.

Avalanche’s Hogwarts Legacy was the best-selling game in the U.S. in 2023 and has exceeded 34 million copies in less than three years.

WB’s studios are huge in gaming—and a $1 billion-grossing Harry Potter game is no small thing— but the gaming group barely rated a mention today. There was no verbal mention of it during an investor call hosted by Netflix’s top execs, no mention of it in a press release. The word “Games” appeared on a slide about WB content during the investor call, next to the Mortal Kombat logo. That’s it. WB’s gaming resources just couldn’t compete for mindshare against the idea of Netflix buying a century-old movie studio and nabbing one of its biggest streaming competitors in HBO Max. Maybe that makes sense, but some of that might also be gaming continuing to operate in an investor/media blind spot.

Netflix also simply had nothing to say about the WB game studios. When I asked a rep for the company if there was anything to share today about plans for the WB Games studios in Netflix or how they might operate vis a vis Netflix’s gaming team, she said she had nothing for me.

There’s plenty of time, of course. For WB Games, for this deal, for plenty of plot twists.

WBD still has to divide itself up in 2026: into the half of the company Netflix wants to buy and the half that’ll remain a new public company, composed of CNN, TBS, TNT, Discover and other more old-school TV components.

Netflix can’t close its deal for the WBD’s streaming/studios until after that, and execs today estimated that it’d take at least 12-18 months from now.

And Skydance, which was assumed the front-runner to buy all of WBD, may yet make a hostile offer directly to shareholders—who need to approve somebody’s bid—saying their offer’s better.

Plus, there could be regulatory hurdles.

After all that? Should Netflix still close its deal, what of WB Games within Netflix?

On Wednesday, I quoted Netflix co-CEO Greg Peters telling investors in October that the company was focusing to a “less-is-more” approach with games.

He kept to Netflix’s year-long talking points about focusing on four types of games:

• Existing hits (aka ports of GTA, Red Dead Redemption to mobile)

• Games for kids (sans micro-transactions)

• Party games played with phones as controllers, while streamed to TVs

• Games tied to Netflix intellectual property

All of the above, so far, have been offered at no extra cost to Netflix subscribers (with a couple of games offered even more broadly as free-to-play titles on mobile).

That free-to-subscribers strategy—and those four categories—don’t exactly fit WB Games’ offerings. Though, I guess you could say that, if/when Netflix owns Batman and is airing HBO’s Harry Potter show, that AAA games tied to such things would sorta fit that fourth bullet point.

But what would Netflix do with, say, a new Batman Arkham game? Surely not offer it to Netflix subscribers for free, right?

For now, the following seem the likely options:

• Netflix runs WB Games as a separate group outside of the Netflix subscription-sweetening Netflix Games.

• Netflix tries to to sell WB Games off.

• Maybe, god forbid, they’d shut it down (hard to see them not wanting that Hogwarts Legacy 2 money).

Maybe they don’t know yet.

And maybe Skydance will outmaneuver them and the above was a waste of digital ink.

I don’t know… and I’ve had no time to report it out, because….

• This was just a quick newsletter that I dashed off in 20 minutes of off-the-top-of-my-head typing. No news round-up, no weekly calendar. Sorry. I’ve been neck-deep working on one of the most complicated stories I’ve ever tried to deliver to Game File readers. I was hoping to have it for you today (which is what I’d teased it in a note to some readers last week). My new target is early next week—though I don’t know what curveballs may come. I’m excited to share it with you.