LOS ANGELES, July 18 (Reuters) – Netflix (NFLX.O) Breaking Hollywood’s rules to create an $82 billion global broadcast giant the rest of the entertainment industry scrambled to copy. But as growth slows, he’s looking back for a way forward, borrowing a page from Walt Disney’s (DIS.N) Play book.
The company, which has changed the way we watch TV and movies, aims to emulate the success of Mickey Mouse and “Star Wars” by trying to build brands across movies, TV, games and consumer products, executives told Reuters in recent interviews.
The Netflix teams are planning ways to tap into more and bigger Netflix shows and movies with universes and characters they can come back to again and again. The franchise strategy, details of which are first reported here, aims to complement Netflix’s efforts to build a massive library of original programming with something to suit every taste.
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“We want to have our copy of Star Wars or our copy of ‘Harry Potter,’ and we’re working hard to build that,” said Matthew Thunell, vice president of Netflix who is credited with founding ‘Stranger Things’. “But these weren’t built overnight.”
The Netflix franchise initiative comes at a critical moment, after two rounds of layoffs amid subscriber losses. It’s racing to build a low-cost, ad-supported version of the service, which it once vowed never to do. On Tuesday, the company is expected to report a loss of 2 million additional subscribers when it reports quarterly earnings. Its shares are down 70% this year.
Some of Netflix’s current partners, who requested anonymity to protect their ongoing business relationships, said they have been frustrated by what they see as a lack of collaboration between film and television groups. They said this has hampered efforts to capitalize on success through sequels, spin-offs, or cinematic adaptations of a successful series.
“It feels like you have to fight your way to building a franchise there,” said one studio executive.
Thunell offered a different view. He and a company spokesperson described an environment of close collaboration among creative executives, who may independently authorize green projects but work toward the same goals.
“In a traditional studio, there are these big walls between the cast, the animation team, and the series team,” he said. “Because Netflix is such a small organization, these walls haven’t had time to build it.”
Treating ‘Stranger Things’
Netflix executives point to “Stranger Things” as a model. The sci-fi series, now in its fourth season, has inspired merchandise from Walmart’s frozen Surfer Boy pizza to Hasbro’s Magic 8 Ball Toys, as well as live experiences. A spin-off series “Stranger Things” and a theater play are in the works. Read more
In the aftermath, Netflix executives said they are planning or in the process of introducing at least a dozen series and movies that tackle “Stranger Things.”
The Spanish series “La Casa de Papel” has been reproduced in Korean and has part of the works. The Regency-era “Bridgerton” is pre-ordered, as is the No-Day reality contest inspired by the South Korean drama “Squid Game.” The fantasy series “The Witcher” has produced an animated movie and is getting an advance copy.
The company also identified three upcoming shows as potential franchises because the stories are so well known, and they brought in an indoor audience.
“The Three-Body Problem,” an adaptation of the first book in a Chinese science fiction trilogy, is being produced with Game of Thrones co-creators David Benioff and D.B. Weiss as executive producers. Japanese manga series, being filmed, and live-action adaptation of the animated series “Avatar: The Last Airbender” just finished filming.
To be sure, not every story works as a franchise.
Executives aim to produce franchises from Millarworld, the Netflix comic book publisher that Netflix acquired in 2017. Millarworld’s first series, “Jupiter’s Legacy,” was canceled after the first season. There are currently six new projects in development, and another in production, a company spokesperson said, adding that Netflix has plans to explore the villains of “Jupiter’s Legacy” in a new series.
“You have to start with the story itself. Does it maintain that kind of expansion? There are some series like Stranger Things that have been hugely successful and have a depth of myth and additional storylines that allow you to jump into animation, features or animation.”
Emerging movie franchises
The movie studio, which started from scratch five years ago, sees a handful of franchises emerging: “Enola Holmes,” about Sherlock’s teenage sister, “Knives Out,” an Agatha Christie-style mystery, “Old Guard,” about an immortal team of mercenaries, a thriller “Extraction” and the zombie tale “Army of the Dead”.
The spy thriller “The Gray Man” begins on Friday. Directors Anthony and Joe Russo, who were praised by film director Scott Stuber as “franchise builders” at the film’s Los Angeles premiere, said they created a rich world with expansion in mind.
“We specifically designed and thought about this novel in a way that would push it forward in other forms,” co-director Anthony Russo said in an interview.
Netflix ramped up its franchise-building efforts with a restructuring in October 2020 under new Universal Television President Bella Bagaria, a former Universal Television executive who has developed Netflix comedies such as “Unbreakable Kimmy Schmidt” and “Master of None”.
With subscriber growth slowing in the fall of 2020, Bagaria sought to extract more expensive deals with producers like Shonda Rhimes “Bridgerton”. She also put together a team to develop prestigious (often big, action-driven fantasy series) and franchises that could turn into franchises.
Netflix has added employees for consumer products and hired in-house book scouts to find businesses to adapt, rather than waiting for outside agents or publishers to bring material to its executives. Thunell called this move a “game changer”. She also created a video game console.
The company began engaging marketing and consumer products employees early in the franchise-building process. These teams, for example, recently traveled to London to meet Benioff and Weiss on the set of The Three Body Problem.
According to Josh Simon, head of consumer products and live experiences at Netflix, “Army of the Dead” producers Zack and Deborah Snyder provided input on the VR experience while they were filming. His team is now working with the Snyders on ideas related to their next movie, “Rebel Moon.”
“We are deeply immersed in production meetings,” Simon said. “We can work for years because we have this level of trust and collaboration with the creators.”
“Stranger Things” alone has the potential to generate $1 billion in annual retail sales starting in 2025 from products, events, and possibly from a theme park ride or digital avatars, said Stephen Extract, CEO of Global Licensing Advisors.
Netflix will make around $50 million to $75 million in revenue from these sales, plus free advertising from merchandise. To get to that level, Netflix needs to keep people engaged with the “Stranger Things” world, he said.
Julia Alexander, director of strategy at entertainment research firm Parrot Analytics, notes that the streaming service has far less experience setting up franchises than its century-old Hollywood competitors.
“Do we have the same confidence in a Netflix machine as we do in a Disney machine? No, but that comes in part from Disney spending years defining what that machine should look like,” Alexander said. “While Netflix dominates the streaming space, it’s still relatively new to building these kinds of worlds.”
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(Reporting by Don Chmielfsky and Lisa Richwin in Los Angeles; Editing by Kenneth Lee and Cynthia Osterman
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