WELCOME TO NETFLIXLAND: THE STREAMER’S PLAN TO DOMINATE DISNEY
In mid June, Netflix announced the locations of its first two Netflix Houses – “experiential entertainment venues” in vast shopping malls that are the exact opposite of the Netflix and Chill experience.
Sited in former department stores at the King of Prussia Mall near Philadelphia and the Galleria Dallas mall, both occupy more than 100,000 square feet and will offer “regularly updated immersive experiences, retail therapy, and a taste of Netflix series and films through unique food and drink offerings,” according to the company’s chief marketing officer Marian Lee.
Announcing the move, Netflix co-CEO Ted Sarandos said “don’t think of it like Disneyland,” leading everyone to immediately think of it like Disneyland. Netflix has already won the streaming wars, with 269 million subscribers versus Disney+’s 153 million, but Disney still dominates in the real world. But to many observers, Netflix Houses look very much like the first step to fullscale Netflix theme parks – tanks on Disney’s lawn.
“Disney’s parks, cruises, theatre shows and merchandise is 30-40 per cent of revenue and a big majority of profits,” says Tom Harrington of industry experts Enders Analysis. Although Netflix is some way behind them, Disney, he says, “is the obvious North Star when it comes to creating entire worlds around IP creations and characters”.
Netflix has been playing in this space for a while – in Toronto, there’s a murder mystery dinner called the Perfect Bite inspired by Daniel Craig’s Knives Out mystery Glass Onion. Los Angeles has hosted both Netflix Bites food pop-up and Squid Game: The Trials, a non-lethal yet nerve-wracking version of the horrific Korean game show. The Banyan Tree Hotel in Kuala Lumpur offers Spill the Tea whilst London’s Lanesborough has the Bridgerton Afternoon Tea, both essentially afternoon tea with a menu designed to look like a Regency gossip rag. The Lanesborough’s collection of on-theme named pastries and sandwiches – including Colin’s Travels, the Book of Eloise and the Lady Whistledown – costs a cool £85 with booze extra.
Then there’s the touring experiences which have already passed through London and have prime shopping mall potential - Melbourne’s Fever Exhibition and Experience Centre, a large warehouse in the suburb of Brunswick, is currently hosting the touring Bridgerton Queen’s Ball every weekend.
Unlike actual royal balls, there are two or three per day where crowds in vaguely Regency costumes queue to see show memorabilia before jigging around in a loose version of dances from the show. Over in Sao Paulo, the Stranger Things Experience is currently housed in the Shopping Eldorado mall – it’s a four-room walk-through with memorabilia, a little interactivity and some 3D effects. Indoor entertainment complex Area 15 in Las Vegas houses a virtual reality game based on Zack Snyder’s movie Army of the Dead, which is essentially a zombie shoot ‘em up.
Finally, at London’s Phoenix Theatre, there’s the Stephen Daldry-directed stage play Stranger Things: the First Shadow, a prequel to the TV series. It’s not exactly mall-friendly, but the technology involved in the staging – especially in the opening 15 minutes – has the feeling of a Stranger Things theme park ride.
But a distinct lack of IP and franchises has stopped Netflix going much further than this; unlike Disney, it doesn’t have a huge treasure chest full of Pixar or Marvel characters to build rollercoasters around. In 2022 the company announced it was looking for its own Star Wars; it hasn’t found it yet.
But the cupboard isn’t exactly bare. In 2018 the streamer signed deals with the CS Lewis estate for the Narnia franchise and Roald Dahl’s estate to develop most of the novelist’s best-known books – with the notable exception of James and the Giant Peach, Danny the Champion of the World and Fantastic Mr Fox.
In 2021, Netflix acquired the entire Roald Dahl Story Company, announcing the deal would allow “the creation of a unique universe across animated and live-action films and TV, publishing, games, immersive experiences, live theatre consumer products and more.” New head of film Dan Lin – producer of Sherlock Holmes and The Lego Movie – has been vocal about wanting more IP, and experiences are part of that strategy.
“In the US the company’s growth is now driven by getting existing subscribers to pay more – or getting freeloading users to pay for the first time – which will inevitably reach a ceiling,” explains Harrington. “Netflix needs to start building complementary businesses if it wants to keep an upward trajectory. These include gaming and advertising but also growing merchandising and experiences which if executed should only intensify fandom of its bigger brands and increase engagement.”
One of the monetisation problems streaming platforms like Netflix have is in its global reach. Netflix either makes its content or buys all rights from production companies, then shows the content globally and… that’s it. In the past, studios and broadcasters have been able to sell the same piece of content many times over. Movies and TV shows are licensed overseas to a number of different buyers for a period of time rather than sold in perpetuity. After a while, they return to sender. Known as “windowing” this means you make the show, then you sell the show or film to the same person again and again.
Indeed, in recent troubled times – Covid excepted - it’s the theme parks that Disney has relied on. In 2023, the parks division – known as “experiences” was the best-performing part of Disney’s business. It posted revenue of $32.5 billion in 2023 – 36% of the company’s total revenue but 70 per cent of its operating income. Disney’s entertainment business, including movies and TV, represented 45 per cent of revenue but just 11 per cent of operating income.
The question is, how long will it take for Netflix to build an experiences business that can generate Disney-style revenue? Disney parks are incredibly well-oiled, iconic destinations. People see them as vacation destinations and stay longer than at rival theme parks – often a whole week or more. Many customers stay on the property in Disney hotels, eating three meals a day via dining plans and paying extra for character experiences. Pricing is structured to encourage longer trips, with entrance fees reducing for extended stays. Disney World has around 300 shops, almost all themed to where in the parks they are located and the shopping experience is part of the destination’s appeal, offering exclusive merchandise. This is a company, after all, that has its own corporate fan club and there are actually real people who will visit the parks to trade pins and badges.
As the website DailyDose says enthusiastically: “Disney Pin Trading is a fun, interactive experience where Disney Guests can trade specially-marked Disney pins with Cast Members and fellow Guests. Kids and adults alike can partake in the fun, collecting pins of their favorite characters, attractions, and parks!”
Disney CEO Ted Sarandos has said Netflix House is “something you might go to a couple of times a month, not just once every couple years.” The company will certainly get the real estate for a bargain price. Both of the 2025 locations are former department stores now lying empty.
“Our real estate clients are desperate to lease out to whoever will take the space,” says Patrick O’Brian, retail research director at GlobalData. “If you get a worldwide global brand taking space it’s very enticing. In the UK we’ve seen much smaller scale ventures like crazy golf courses take some of the old BHS and Debenhams stores that have struggled to be re-let but we haven’t seen one really successful entertainment concept come up and spread like wildfire.”
O’Brian isn’t sure if Netflix would be guaranteed to generate footfall rather than just leech on it, however. “It depends on the mission they attract in terms of the shopper - gymnasiums taking up a large amount of space don’t really have a halo effect in malls,” he points out. “People go there with a different mission and then leave. And one of the keys to success will be to keep the offer refreshed, so that it keeps people coming back to what’s new.”
As for the future, online theme park forums are already full of ideas for Stranger Things rides and attractions: an Upside Down-themed land; an indoor coaster based on Eleven’s powers; a live show based on the Battle of Starcourt mall. Netflixland, here we come.
2024-06-27T16:15:43Z dg43tfdfdgfd