Netflix (NASDAQ:NFLX) is taking several measures to deepen subscriber engagement and drive additional revenue amid growing competition in the streaming space. One such initiative is selling merchandise based on its content. Earlier, the company made merchandise tied to its hit shows. However, the company is now creating merchandise way before the release of a show, as noted by a Wall Street Journal report.
Netflix Strives to Enhance Subscriber Engagement
Previously, Netflix made merchandise for shows like Stranger Things and The Witcher only after they attained popularity. The streaming giant has now changed its approach, taking inspiration from rival Walt Disney (NYSE:DIS), which has been creating merchandise linked to the characters from its movies and theme parks for decades. As per the Wall Street Journal, Netflix began working on the merchandise for the new series One Piece 18 months ago rather than waiting for it to become a hit.
One Piece is a live-action series based on a famous Japanese manga (a term used for comic books, cartoons, and graphic novels in Japan) of the same name. Merchandise based on the show includes keychains that are sold at U.S. Walmart stores (NYSE:WMT), sweatshirts available at fashion retailer Zara, and figurines made in collaboration with Japanese merchandise company Bandai, among others. To Netflix’s luck, the series, which debuted on August 31, is already a huge success.
Interestingly, the company has also been working on creating experiences like a pop-up restaurant featuring chefs of food-based reality shows and themed events based on series like Bridgerton and Stranger Things.
Netflix’s growing interest in creating merchandise and experiences tied to its content comes at a time when the company is trying to boost its subscriber base and improve its profitability through measures like the rollout of an ad-supported tier and a crackdown on password sharing.
Netflix’s new strategy of creating merchandise before a show’s release is also supported by the fact that the company has now built a pipeline of its own content rather than entirely depending on shows licensed from other studios.
Overall, the company is focused on strengthening its relationship with its subscribers and bringing in an additional source of revenue by selling products based on its shows.
Is Netflix a Good Stock to Buy?
Last week, J.P.Morgan analyst Doug Anmuth lowered his price target for Netflix to $455 from $505 but maintained a Buy rating on the stock ahead of the Q3 2023 earnings report on October 13. The analyst explained that investor conversations indicate concerns about paid sharing being less impactful than expected. Additionally, the 2024 margin expansion could be less impressive than anticipated.
With 18 Buys, 12 Holds, and one Sell, Wall Street has a Moderate Buy consensus rating on NFLX stock. The average price target of $472.64 implies 24.3% upside potential. Shares have risen 29% year-to-date.
