Netflix made news this week when it unveiled a new toy line inspired on its smash show Squid Game in collaboration with Walmart (NYSE:WMT). This agreement adds another dimension to Netflix’s foray into goods and other new businesses. It’s also a departure from the company’s mainstreaming business.

Netflix next Disney?

It resembles one of its key video-streaming competitors, Disney, which has been heading in the opposite direction, toward streaming. So, does this imply that Netflix will expand into new regions as well?

Netflix is the obvious leader in streaming media, but the competition is catching up with the streaming industry, which has been expanding thanks to stay-at-home orders throughout the epidemic. Netflix had 209 million members at the end of the second quarter, while Disney had approximately 174 million paying subscribers at the conclusion of its third fiscal quarter (July 3).

The actual setback for Netflix was a net loss of customers in the United States and Canada in the second quarter. Nonetheless, it acquired 1.5 million members internationally, and management anticipates another 3.5 million in the third quarter.

However, the reality of a potentially crowded industry and rising competition means that Netflix is looking for new ways to expand. Its major method of driving consumer engagement and acquisition has been the creation of its own content. This year, the firm expanded its original content pipeline while rival networks established their own streaming services with unique programming. For the whole year, Netflix has more than 100 new pieces of content planned. Taking a leaf from Disney’s playbook, the streaming behemoth is now going horizontally to expand in new ways.

CEO Reed Hastings announced the company’s entry into the gaming business during the company’s second-quarter earnings conference call in June. He did, however, underline that the goal was to “improve the service,” not to raise short-term profits. “There are a lot of supporting components, consumer items… that we’re really trying to build to promote the title brands and get our conversations going around both movies so that the Netflix service is a must-have,” he explained.

That is certainly the case with Squid Game, which has become Netflix’s most-watched program ever and has spawned a plethora of tangible goods. Netflix sells goods both on its own website and through partner websites. The partnership with Walmart represents a deeper plunge into Netflix evidenced goods, similar to Disney’s shop-in-shops at Target.

On Tuesday, Netflix will report its third-quarter profits. It would be interesting to watch if Hastings maintains his support-services strategy in his statements, or if there will be a more open push to create new income sources. Disney and Comcast’s Universal Studios have already developed theme parks based on their studio material, and with Netflix developing its own content portfolio, it may only be a matter of time before it joins this space as well.

There are additional methods to monetize its material, such as licensing and other forms of media. One of the characteristics that have made Netflix such a fantastic company to own over the years, even before it had positive cash flow, is its ability to pivot into new sectors and build successful businesses out of them.

The publication of second-quarter earnings scared off investors, leading the price to plummet, but renewed confidence has driven it back up. The amount of new customers recruited this quarter will decide the stock’s success in the immediate run. Long term, Netflix, on the other hand, continues to push into new areas of expansion, which is a critical component of a good growth stock, making it a desirable company to own.

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