Netflix has dabbled in mobile games before and recently disclosed its first set of cooperative couch or party games playable from the TV screen. And as it focuses on areas for long-term growth the SVOD giant intends to “ramp investment” - albeit “judiciously” - on gaming efforts, which executives said are really more about interactivity broadly.
Netflix on Tuesday reported Q3 revenue of $11.5 billion up 17.2% year-over-year, and a below-guidance operating margin of 28% that was impacted by a $619 million expense related to an ongoing dispute with Brazilian tax authorities.
Netflix no longer reports quarterly subscriber numbers and has previously said user metrics like engagement are a better indicator of subscriber health. On the earnings call, investment analysts asked how gaming could change time spent with the streamer each day. Netflix Co-CEO Greg Peters acknowledged games are a form of entertainment that consumers clearly care about given the time and money spent on the medium.
Per Peters, games represent an approximately $140 billion global consumer spend opportunity, excluding China and Russia and not accounting for ad revenue that’s linked to time spent and engagement.
During Q4 execs cited plans to introduce party and couch co-op games served on the TV and delivered from the cloud that can be played using a phone as a game controller – designed with the vision to be an evolution of family game night on the TV. The first slate of those were announced earlier month and will be released later this year including Lego Party!, Pictionary Game Night, Party Crashers: Fool Your Friends!, Boggle Party, and Tetris: Time Warp were available to play on smart TVs.
Speaking on the company’s Q3 earnings call, Peters cited Netflix’s “best ad sales quarter ever”, as well as the continued build out of live offerings and games, including the launch of party games.
“This progress in these areas is indicative of how we think we can best compete and grow the business over the long term,” Peters said. “We focus on a few key areas that we think matter the most, and then we work hard to deliver continuous improvement in those areas.”
All about interactivity, supporting the core business
With Netflix’s efforts on live content and games, the approach is about how the streamer can use different mediums to introduce interactivity and its own content IP to play off each other, deepen the consumer connection to programming and drive engagement for both – ultimately supporting key business metrics.
Peters said that it usually refers to the effort as “games” because that’s an easy short hand but Netflix sees it as more about interactivity broadly.
“And how does interactivity become complementary to linear storytelling? How does is it able to unlock whole new storytelling?”
While not a typical “game” itself, the first interactive live feature Netflix has teed up is real-time voting, which its currently testing on Dinner Time Live with David Chang.
Peters said it will roll the feature out more broadly, starting with Star Search in January, adding “we expect to provide other interactive features to deepen engagement with live events as we go in the future.”
As for actual games themselves, Netflix has been building the foundations over the past few years and going forward, he said, will focus on offering more high-quality games “in a few key genres and targeting the right cohort of users.”
Peters described this as a “less is more strategy” focused on a few identified verticals, including immersive narrative games based on Netflix IP like Squid Game Unleashed or golf with Happy Gilmore. He also called out games for kids tied to content like Peppa Pig, which don’t have ads or in-app payments, as well as those connected to mainstream, established game titles like Grand Theft Auto.
In addition, Peters pointed to “socially engaging party games” – like those previously mentioned which are rolling out this holiday season and are meant to cater to the whole family.
“The part I like most about this is these games are super easy to access” within the Netflix platform and they don’t require a special controller “that’s key to this access,” he said.
In the future, he said Netflix expects “creators will find really interesting and novel ways to unlock all of the power” that’s in people’s mobile phones to be used as a gaming controller.
While taking steps, Netflix thinks there’s a lot more it can do in the gaming and interactive space. Still, it’s already seeing what kind of impacts more interactivity and overlap with IP can have for the business.
“We already see how this approach not only extends the audience’s engagement with the story, but it creates a synergy that reinforces both mediums, the interactive and the non-interactive side,” Peters commented. “It drives engagement, it drives retention, therefore supports the business.”
And with Netflix’s ad revenue on track to double in 2025 (exact figures were not disclosed but Netflix said that’s still off a relatively small ads plan base – some analysts estimate it could generate up to $3.1 billion in ad revenue this year), engagement metrics again are ever-key.
“Looking ahead, we're going to ramp our investment in this [interactive games] area judiciously, based on demonstrating that we're ramping returns to the business,” he added.
Room to grow the core business
While live events and interactive games are two areas Netflix sees for long-term growth and competitiveness, it still sees plenty of room to expand its core streaming business.
Netflix Co-CEO Ted Sarandos noted that the streamer commands about 10% of TV time in its largest market of the U.S. That illustrates its leading streaming position, but a large share of TV time still spent on traditional linear also means “enormous room for profitable growth in the core business,” Sarandos said.
The SVOD expects to benefit long-term from a continued natural adoption curve as consumers continue to shift from traditional TV to streaming.
And while Netflix had some top titles in Q3 (like Wednesday with 114 million views) Sarandos said even the largest titles and biggest hits “generally drives less than 1% of our total viewing.”
“It’s really about having a steady drumbeat of shows and films that our members love. That’s what drives continued, steady growth and engagement over time.”
To that end it has a strong content slate teed for Q4 and into 2026 (with the return of series titles like Stranger Things, Bridgerton, Beef, Emily in Paris, Outerbanks, Ginny & Georgia, among others).
But some engagement drives outsized value
That said, Peters noted it’s also seeing “that certain engagement delivers outsized and different value.”
Some examples of that in Q3 include its live super middleweight championship bout between Terence Crawford and Canelo Álvarez. The event was No. 1 on Netflix in 30 countries and in the Top 10 in 91 countries, attracting more than 41 million viewers. And on Netflix’s social channels the fight generated over 950 million owned impressions.
Of course, there was also the break-out summer hit of original feature animated film KPop Demon Hunters. The title is now Netflix’s most popular film ever with 325 million views and which the streamer held up on Tuesday as an example of its content becoming part of the culture conversation.
In its letter to shareholders Netflix noted HUNTR/X become the first K-pop girl group to reach No. 1 on Billboard’s Hot 100 list and said characters from the film are the top 5 most-searched Halloween costumes.
“Both are great examples, and they’re also from really different parts of our programming spectrum of this punctuated value,” Peters said.
And Netflix isn’t looking to rest on the popularity of KPop Demon Hunters, as it’s actively expanding the universe and getting into toys.
Mattel and Hasbro sign on as KPop Demon Hunter toy licensees
Earlier today Netflix announced Mattel and Hasbro have each been named a global co-master toy licensee for the film IP – the popularity of which Sarandos said “proves our ability to create breakthrough hits and move the culture.”
He also characterized the Mattel and Hasbro deals as “a rare, maybe unprecedented partnership for them,” adding “we’re going to need them both to help meet the massive demand for fans to get closer to their characters off screen.”
The combined partnerships in 2026 will introduce a portfolio of toys, collectibles, games, and role-pay products based on the film, with worldwide distribution.
And Sarandos hinted at bigger potential and visions down the line.
“When you have a hit the size of KPop Demon Hunters, it stirs the imagination of how big we could take this as long as week improving on the core business every day,” he said.
Article updated to reflect that Netflix reported earnings today, Tuesday. A prior version incorrectly stated Wednesday.