Friday Mailing #46: Netflix, Wonka, Gaming, Facebook & Kids & Family

A New Slogan; Why Netflix's big bets on IP and gaming seem to have a common theme: kids

Slogan Update: “Revealing Insights.”

PARQOR’s new slogan is “Revealing Insights.”

It is the simplest encapsulation of my approach to writing about streaming and business, to date. 

It’s about revealing insights from the executive’s perspective: the driving assumptions, the internal analysis, the envisioned outcomes for driving enterprise value, and the risk/ reward calculation.

It is also about delivering revealing insights that either offer marginal value or fundamentally transform your perspective.

I am excited to start applying it to more marketplaces as I dive into the convergence of media, gaming, music, and e-commerce business models.


Netflix, Wonka, Gaming, Facebook & Kids

Netflix has made two major moves in the past two weeks:

Both have been generally perceived by the marketplace as unrelated, iterative steps within two separate initiatives at Netflix:

In obvious ways, they are unrelated.

The acquisition of the Roald Dahl library solves for the first.

It is an obvious solution to a problem I wrote about in Mic Drop #31: A Tough Week for Netflix’s Bets on Original IP:

I predicted for Netflix in 2021 that “an evolving and growing tension between owning IP versus licensing IP” would “complicate Netflix’s strategy”. This evolving tension increasingly exposes a weakness in Netflix’s strategy: an inability to produce owned and original IP, despite the objective of “becoming” Disney and despite the popularity of Stranger Things.

The Roald Dahl library — which will not come with the previous movie versions of his work — is another bet in the vein of its Millarworld acquisition, and Stranger Things.

But Netflix’s bet on Dahl’s library is also something very different, having more in common with its recent deal with Shonda Rhimes than its original Millarworld IP acquisition:

Netflix says it plans to use the acquisition of the Dahl company as a vehicle for “the creation of a unique universe across animated and live-action films and TV, publishing, games, immersive experiences, live theater, consumer products and more.” 

Netflix’s acquisition of Night School Studio helps to solve for building “a great collection of exclusive games designed for every kind of gamer and any level of play.”

Together, both the Dahl library and Night School Studio acquisitions are big bets on gaming with kids and family audiences, in particular.

Netflix “Becoming” Disney

Around 60% of all Netflix subscribers watch kids and family content every month, and half of all members watch animated kids shows and movies on the service, as Netflix's director of product innovation Jennifer Nieva shared in a recent interview with Protocol’s Jankko Roettgers.

But Netflix also has the objective of “becoming” Disney, which Observer’s Brandon Katz wrote about back in April:

Netflix “becomes” Disney by refocusing its content efforts on key verticals that sharpens the efficiency of investment. There’s a reason why Netflix’s content budget devoted to projects in development is nearly triple that of Disney’s. There’s also a reason why their return-on-investment isn’t as impressive. So what does a less unwieldy Netflix even look like?

In this light, I think both the Dahl library and Night School Studio acquisitions are iterative steps towards Netflix “becoming” Disney, with the Dahl library being obvious and Night School Studio being the less obvious step.

Netflix’s bet on Night School Studio, and on offering in-app gaming more generally, is the opposite of what Disney has done in gaming (it closed its in-house studio in 2016 and pivoted to a licensing model). That is interesting on its own.

What makes it more interesting is that bringing gaming in-house is an un-Disney-like move to become more like Disney, and at a time when Disney’s streaming business has become a global competitor for kids and family content.

Netflix’s Paranoia?

What’s struck me about The Wall Street Journal’s reporting last week on Facebook’s efforts to attract and engage preteens is how the paranoia about losing a generation to competitors like Snapchat and TikTok is a motivating factor behind its controversial research.

Netflix’s big bet on the Roald Dahl library (an undisclosed figure described as “all but certain to be the biggest IP acquisition deal ever for Netflix, given its historically light dealmaking”) can be reasonably interpreted to be a similarly paranoid move, and without the ethical concerns.

But, in this light the Night School Studio acquisition seems a bit more nuanced. Meaning, it doesn’t solve directly for paranoia about competition with Disney, but it does bring a gaming studio’s approach to developing new IP in-house at Netflix.

Why Night School Studio May Be Significant

I wrote in Mic Drop #31:

…the question is whether a software service that relies on long-tail consumption can produce Disney-like, fat-tail IP in the long term. Reed Hastings and Ted Sarandos continue to sell investors that they can, but the evidence is still not there.

Netflix has increasingly turned to gaming worlds IP for original animated content and live-action: IGN has a good list here.

In this light, Night School Studio solves a different pain point for Netflix: it becomes a different model for developing in-house IP, one closer to Netflix’s software roots than to Hollywood’s traditional IP development model. v

To compete with and to “become” Disney, Netflix needs to build new worlds of IP like Dahl’s library, but also new gaming worlds.

Night School Studio Co-founder Sean Krankel wrote in the blog post about the deal:

The Netflix team has shown the utmost care for protecting our studio culture and creative vision. We’ll keep making OXENFREE II. We’ll keep cooking up new game worlds.

I think this last sentence says everything: “Cooking up new games worlds” solves Netflix’s challenges with owning IP, and it gives Netflix a competitive, differentiating advantage over Disney.

Combining that approach with the Dahl library super-charges that strategy.

Netflix’s pivot to gaming seems intricately tied with a broader, more software-driven approach to “the creation of a unique universe across animated and live-action films and TV, publishing, games, immersive experiences, live theater, consumer products and more.”