Netflix Says: No Games; Why They Should Reconsider

Yesterday, The Consumerist talked with the Vice President of Netflix Corporate Communications, Steve Swasey, and asked him if Netflix would ever consider offering video games by mail, as its biggest rival Blockbuster seems to be considering.  Swasey answered in the negative:

Video games are a different economic model than movies and TV episodes, on which Netflix concentrates to provide the greatest convenience, selection and value to consumers… Movies are perennial. A great movie from 1972 is still a great movie but who wants to play Madden ’95?

So… you’re backing up your claim that video games are not perennial by bringing up a franchise that is released yearly?  Of course the Madden games aren’t perennial!  I don’t imagine many people have Dr. Jekyll y el Hombre Lobo (1972) in their queues, and I’m sure Netflix has a correspondingly low number of discs in stock.  We’re not asking you to keep a billion copies of Madden ’95, just maybe some of Warcraft III, or Smash Bros Brawl, or Ico.

Setting aside the poor argument Swasey presents, here’s why Netflix should seriously consider getting into video game rental: It is estimated that Netflix will gain 2 million new subscribers from consoles alone in the next year.  That’s half of their projected subscriber growth for 2010.

Of course, Netflix has a history of being very foresighted; marrying caution with its ambition.  The success of Netflix threatens physical rental stores, who have deep ties with the film and television industries, which Netflix needs to have good relations with in order to secure new releases and the right to streaming downloads.  The company has shown that it’s very willing to compromise in negotiations if that means they come but an inch closer to their goals.

For example, Netflix recently signed deals with both Universal Studios and 20th Century Fox in order to add to their catalog of streaming video.  Fox shows like 24, Lie to Me, and the entirety of Arrested Development and Buffy the Vampire Slayer will become available, and Universal will allow many older releases to be digitally rented.  In exchange, Netflix will not be able to rent out Avatar or Its Complicated until a month after their respective releases.

PCWorld sums up why this agreement shows Netflix’s savvy understanding of their base:

If you’re a Netflix subscriber, your feelings about this deal will of course depend on how you use the service. Personally, instant streaming was the main lure for me, not new releases. I’d much rather have the entire season of “Arrested Development” available on my iPad and Xbox 360 than watch a 2D version of “Avatar” on DVD. And I’ve been meaning to finally watch “Being John Malkovich” for a long time. Can’t say the same thing about “It’s Complicated.”

Lets go back to those 2 million new, console-owning subscribers that will make up half of Netflix’s 2010 new subscribers.  Don’t you think they’d be interested in renting video games for the console we already know they have?  Netflix could probably get away with charging a little extra for it, too.  Why pay for Gamefly when you can get the same thing from one service?

Realistically, if we want Netflix to pit themselves against the notoriously tight grip that brick and mortar game stores have on video game developers, we’ll probably have to wait for the day when the company no longer has to pacify the movie industry to stay in business.  But when they do, their move to availability on the console means that the audience will be there.  For now, they can take it one thing at a time.

(via Techmeme and Joy stiq.)