Netflix Shutters AAA Video Game Studio

Despite continued optimism among top management about the potential of video games, Netflix is shuttering its AAA game studio in Southern California.

The move, first reported by GameFile, was confirmed to Deadline by a source familiar with the closure.

AAA is one of a handful of small studios put under the corporate umbrella by Netflix over the past couple of years. It had yet to produce any titles by the time it was shuttered.

A Netflix rep declined to comment when contacted by Deadline.

The company has mounted a major effort to position games alongside series and films as a draw for subscribers. Yet a genuine video game blockbuster can get expensive to make and market and Netflix overall has been actively looking to streamline and lower its expenses across many business verticals. On last week’s third-quarter earnings call, the topic of games arose multiple times but execs called out titles either tied to its pre-existing series or more casual games that are generally less costly to produce.

The studio closure comes just three months after Netflix installed former Epic Games exec Alain Tascan as president of its games division. He took over for Mike Verdu, who was moved to a role centered on tech innovation and gaming. Prior to his 6-year stint as an EVP at Epic, Tascan co-founded Ubisoft and started a Montreal studio for gaming giant Electronic Arts.

Three key hires over the past two years by AAA, of execs linked to blockbuster franchises Overwatch, Halo and God of War, have since left the company.

On the earnings call, Netflix Co-CEO Greg Peters said investing in video games and other initiatives is akin to “planting seeds.” The ventures will hopefully “strengthen our entertainment offering,” he said, in turn helping with subscriber growth and retention. “We’re excited about games based on Netflix IPs,” he added. “We’ve got a Squid Game coming. We’ve got a Virgin River Christmas. We’ve got The Ultimatum. We’ve got games based on storied game classics like Monument Valley 3.”

Co-CEO Ted Sarandos, notably, included games when addressing overall content production during the call. “Our aim here is to always have a very steady drumbeat of great new TV shows and films, and games for our members to watch throughout the year,” he said.