The streaming giant is about to unveil a new experience called Netflix House. Netflix has changed the entertainment industry by turning the classic living room into an "entertainment hub" so to speak.
By disrupting the industry, first through DVD mail and later by streaming video, Netflix has made it possible for anyone paying a modest monthly fee to enjoy a rich selection of movies and TV shows without having to get off the couch. Over time, the cinema industry was decimated and the silver screen lost its primacy.
But after focusing on digital for so many years, Netflix now seems ready to embrace a business it has long avoided, the "brick-and-mortar experience".
Netflix House is coming
According to Bloomberg, Netflix is planning new destinations where fans of shows like Stranger Things and Squid Game can go to have themed, immersive experiences built around retail, dining, and things like an obstacle course based on the Squid Game .
This is the first time the company is building permanent brick-and-mortar locations that will serve as extensions of its brand. The new spaces will be called Netflix House and the company is expected to open the first two in 2025, expanding the concept globally.
Netflix has also experimented in the past with promoting consumer products. It has produced frozen pizza with the Stranger Things brand, or partnered with Nike to release Nike x Stranger Things shoes. Last but not least, he also has a pop-up retail store in Los Angeles to test the demand for his branded merchandise.
Content support
Management views the Netflix House project as a way to encourage consumption of current content rather than a new revenue stream. However, this may change with developments, of course.
The company also has another experience-based opportunity under its nose. It could host theatrical performances of some of its movies and TV shows in Netflix houses. They could even be accompanied by Q&As with the stars or directors, and the company could host select previews of the upcoming season for fans of certain shows, charging a premium for the privilege.
The streaming leader's shares have jumped 36% this year
Netflix recently announced its third quarter results, which, it should be noted, greatly impressed Wall Street. While revenue of just over $8.5 billion was in line with analysts' estimates, diluted earnings per share (EPS) of $3.73 easily topped forecasts.
But shareholders in the streaming service are most interested in subscriber numbers. Netflix has "crushed it" in this regard, too, adding nearly 8.8 million new members in the past three months. Unsurprisingly, the stock jumped double digits after the news.
Impressive finances
The scale of Netflix is reflected in the company's financial picture. Management expects operating margin to be 20% this year and between 22% and 23% in 2024.
This year, the company plans to generate free cash flow of $6.5 billion. In addition, $10 billion has been added to Netflix's share buyback capacity. These are the hallmarks of a financially healthy company.
As if that wasn't enough, Netflix's situation looks even better compared to its key competitor Walt Disney. In its direct-to-consumer segment, the company's House of Mouse reported a $2.2 billion operating loss during the first three quarters of fiscal year 2023.
Netflix executives just announced that US customers will have to pay more for basic and premium programs without ads. Bears may argue that the timing of this decision is poor given the uncertainty surrounding the economic environment.
