Netflix Ads and Gaming: A New Growth Strategy

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Background: What Netflix is Doing Netflix gaming strategy

Streaming platforms (e.g., Disney+, Amazon PrimeVideo, HBOMax, etc.) emerged, consumer preferences began to change, and market growth slowed. Consequently, Netflix needed to move beyond relying solely on a subscription model. (c) New Bet: Advertising + Gaming As part of this transformation, Netflix has placed its bets on two key new chess-players. Ad-supported subscription tiers—meaning a service with lower prices or ads, thereby attracting new subscribers and increasing advertising revenue. Gaming initiatives—mobile games, TV gaming, and attempts to create games based on its popular show franchises. Both of these are significant changes—as they move Netflix from a mere “viewing service” to a “playing and advertising platform.”

Current Situation and Investor Outlook

A summary of recent news, a recent report states: “Netflix’s ad and gaming bets in focus as investors seek clarity on pay-off.” The report notes that Netflix has seen a stock market rally of approximately 120 billion USD this year, but the real test is whether its major investments (particularly gaming and ads) will deliver sustainable growth. For example: Netflix has spent nearly $1 billion on gaming and released over 120 mobile games, but their impact hasn’t been significant to date—less than a 0.5% increase in user engagement. Meanwhile, the ad-supported tier is growing at a good pace at Netflix—its user base stood at ~94 million as of May. However, this tier’s revenue share remains small. This quarter (Q3 2025), the company is expected to report ~17.2% revenue growth and ~27% net profit growth.

Investor Questions Investors’ concerns/points of focus in this context are: Will the ad-supported tier truly complement the subscription model, or will it simply become a “low-cost sub-model”? Will the heavy investment in gaming see a payoff—that is, will gaming engage users enough to spend more time on the platform, leading to increased revenue growth? This milestone is significant for Netflix because the “streaming video first” model has been under pressure over the past few years. Rising costs, content competition, and the limitations of its efforts were evident. This new model—advertising + gaming—could be a transitional phase. If successful, Netflix’s business could move beyond “subscription-only” to “multimodal digital entertainment”—video + games + advertising. Therefore, this quarter’s results are a “provenance test” for investors—if successful, the rally could continue; otherwise, investors’ patience may run thin.

Analysis of the Ad-Supported Tier Netflix gaming strategy

What is this model? on Netflix gaming strategy The “ad-supported” tier means that users receive the service at a reduced price or in exchange for viewing ads. Advertisers place ads on the platform, creating an additional source of revenue. What has Netflix achieved? Netflix launched this tier some time ago to provide service to customers who weren’t ready for a premium subscription. This tier has gained momentum—reports indicate ~94 million users in this tier as of May. Although the company hasn’t disclosed revenue from this tier—analysts estimate it will be ~US$662.3 million by Q3 2025. What are the prospects? This tier can attract new customers, especially in markets where premium pricing is less acceptable. By becoming a source of advertising revenue, it could reduce the complete reliance on the subscription model.

Other information captured by advertising (user behavior, viewing time, etc.) can make the platform smarter. Challenges and Risks The advertising tier typically doesn’t offer as much margin as the premium tier—because advertising also increases costs (e.g., ad server costs, ad management costs). If advertisers don’t see sufficient returns (e.g., low viewing time, low user engagement), ad rates won’t increase.

This tier may not be as successful as the premium tier in driving user engagement—and if it does, it may remain a “low-cost service,” not a “growth engine.” Competition: Other streaming companies are also launching ad-tiers, potentially diminishing advertiser power. Conclusion: So, the ad-tier has significant potential—but it hasn’t been “packed” yet. Investors are monitoring how much actual revenue and margin this tier will generate this year/over the next few quarters.

Gaming Business Analysis on Netflix gaming strategy

Why gaming? Video games are a huge industry today, with mobile gaming, console gaming, cloud gaming, and more. Various Consumers’ focus is shifting from just “watching” to “playing”—so Netflix saw a new opportunity by combining “our popular shows + games.” Gaming’s advantage is that it can increase platform engagement—if users spend time playing games, their loyalty to the platform can increase, advertising views can increase, and cross-selling (e.g., in-app purchases within games) can occur. What has Netflix done? According to reports: Netflix has acquired gaming studios, investing approximately US$1 billion. It currently has over 120 mobile games released—including games based on its popular shows, such as those from SquidGame, and licensed games like GTA: San Andreas. Recently, the option to play games on a TV screen has also been introduced—for example, Pictionary-style games like “Family Party Games.” Challenges have emerged.

What does this mean from an economic and investment perspective?

The changes are significant because Netflix gaming strategy no longer publicly discloses subscriber numbers. Investors are therefore shifting from “subscription numbers” to “quality and behavior,” focusing on competition and market dynamics—pricing, alternatives, pressure from other platforms, and consumer spending. Is the foundation for this rally strong? Reports indicate that Netflix’s market share has rallied to ~US$120 billion this year—meaning investors are optimistic that the changes will work.

Like other tech companies, Netflix is being seen as a “transformation story”—moving from an old business to a new business model. If advertising + gaming succeeds, it could take Netflix beyond being a “streaming-only” platform and into a comprehensive entertainment service. But is this too risky? Yes—because expectations have become too high. If results fall short of expectations, the gap between “thought” and “actual” will be visible, and the stock’s rally could be reversed. Netflix, especially in gaming, isn’t yet considered “proven”—the results of the investments made aren’t yet clear. Profits from the advertising tier may take time to arrive—investors are looking not at today’s “payoff,” but at “future payoffs.”

Understanding it as a “human brain”: A memorable metaphor

Let’s say you’re listening to a story from a person—namely, “Netflix.” This person was previously very successful—he had mastered a certain niche (streaming service). But now he realized that times are changing—watching TV alone isn’t enough; people want gaming, advertising, and interaction. So he decided: “I’ll try something new”—learn to play games and earn money through advertising. Gaming Hall Here he’s learning games, running mobile-TV games, and trying to get people to play them too.

Scene 3 (Circle-Stage) — Here, he’s observing audience-user behavior: how long people stay with him, are they playing new games, are they watching ads. Scene 4 (Investor Room) — Here, investors are sitting, looking at the data has this guy invested in new ventures, what results are they seeing? Their patience is limited. If he learns the right skills, masters gaming, and finds a working advertising model — his success could rebound in the next few years. But if he doesn’t learn the skills, can’t attract gamers, and can’t retain advertisers — even his past successful history won’t carry him forward. This metaphor simply explains why Netflix’s current efforts are both enthusiastic and vulnerable.

Its Importance in India and the Global Context with Netflix gaming strategy

What does it mean for India? The entertainment sector in India is growing rapidly — the number of streaming users, gaming users, and advertising consumers is huge. If Netflix succeeds with these new models in India, it could see significant opportunities.
For example, a low-cost advertising tier could be particularly attractive in markets like India—where consumers are more likely to consider premium subscriptions. Gaming is growing rapidly in emerging markets—mobile gaming has grown rapidly in India, so Netflix’s gaming model could benefit here. Globally, Netflix faces competition in the US, Europe, and Asia—from other platforms, local content, and intrusive gaming platforms. If successful, it could become an example of a “successful pivot” globally. Both advertising and gaming models have significant growth potential—especially in areas like TV-web gaming, smart TV gaming, and platform cross-integration (mobile-TV).

What’s to watch in the next 12-18 months?

Look at Q3 2025 results: How much revenue came from the ad tier? How much activity came from gaming. Pay attention to the following: Ad tier active user count and ad revenue; User time on the gaming platform, number of games downloaded/played, in-app spending, etc.
Overall revenue growth and margin improvement. Subscriber numbers are not open, but look at other indicators (such as consumer sentiment). State of competition – What are other platforms doing in gaming or the ad tier? If these indicators show positive trends, Netflix could be in for a “reboot”