With mounting competition in the streaming space, Netflix is implementing new initiatives to strengthen subscriber relationships and find additional revenue streams. One such strategy is capitalizing on merchandising opportunities around its popular shows.
Evolution of Netflix’s Merchandising Approach
In the past, Netflix produced merchandise for established hit shows like Stranger Things and The Witcher. However, the company has shifted its model, taking inspiration from Walt Disney’s decades-long success linking merchandise to characters and stories across its parks, movies and more.
According to a Wall Street Journal report, Netflix is now creating merchandise around new shows as early as 18 months before release. This proactive approach was seen with the recent live-action series One Piece, based on a famous Japanese manga. Related merchandise hit stores ahead of the August 31 premiere, including Walmart keychains, Zara sweatshirts and Bandai figurines. The show has already proven a major success.
Netflix has also been developing experiences like pop-up restaurants with its celebrity chefs and themed events for shows including Bridgerton and Stranger Things.
Driving Factors Behind the Strategy Shift
Netflix’s move towards more proactive merchandising comes as the company strives to boost subscriber numbers and profitability. Initiatives like the new ad-supported tier and account sharing crackdown target those goals.
Additionally, having established its own robust content pipeline, Netflix is less reliant on outside licensed shows. This gives the company more flexibility around merchandising its original programming.
Overall, Netflix aims to strengthen customer loyalty and open up merchandising as a new income source.
Assessing the Stock
Ahead of Netflix’s Q3 2023 earnings on October 13, J.P.Morgan analyst Doug Anmuth lowered his NFLX price target to $455 from $505 due to concerns around limited impact from the paid sharing rollout. However, he maintained a Buy rating.
Wall Street holds a Moderate Buy consensus on Netflix stock based on 18 Buys, 12 Holds and 1 Sell. The average price target of $472.64 suggests 24.3% upside potential. The stock has risen 29% year-to-date.
Key Takeaways
- Netflix is proactively creating merchandise around new shows to boost engagement and sales.
- The company has shifted from waiting for hits to emerge to merchandising shows as early as 18 months pre-release.
- The strategy aligns with Netflix’s subscriber and profitability goals amid rising competition.
- While paid sharing impact draws some analyst concern, Wall Street largely remains bullish on NFLX stock.
Final Thoughts
With its merchandising evolution, Netflix aims to build on its original content success to deepen customer loyalty and relationships. However, the strategy’s ability to deliver a significant new revenue stream remains unproven. Investors have responded positively to the company’s efforts to confront competitive threats, but future subscriber and earnings growth will determine NFLX’s performance.
Bernie Grady is a technology and business journalist who writes about trending topics in the world of technology, entertainment, and business. She has a keen eye for spotting new trends and loves to share her insights with her readers. Bernie has been writing professionally for over 10 years and has experience covering a wide range of topics. When she’s not writing, she enjoys spending time with her family and friends.