Netflix's Move From Screen to Shelf Could Be a Genius Diversification Play

Netflix (NASDAQ: NFLX) has come to dominate the video entertainment industry, with more than 300 million global subscribers.

However, there's still room for growth and new opportunities for the company. It has long had ambitions of building more of a flywheel-style business model like Walt Disney, which has been able to capitalize on its popular movie franchises and monetize them through its theme parks, consumer products, and live entertainment.

Netflix has experimented with this, selling some products from series like Stranger Things and experiences inspired by Bridgerton. But it now has its biggest opportunity ever to expand beyond video entertainment with KPop Demon Hunters, the viral children's animated movie. KPop Demon Hunters has become the most-watched movie ever on the Netflix platform, with 325 million views as of its earnings report.

Image source: Netflix.

Netflix makes a move for the toy biz

The movie has been a viral sensation for kids and is likely to be a popular choice for Halloween costumes. The buzz is well-timed ahead of the holiday season.

Netflix is trying to take full advantage of the interest in the movie and a soundtrack. It's teaming with Hasbro and Mattel to produce toys, collectibles, games, and other products based on the movie, which features a female K-pop trio that also fights demons.

Mattel will develop a line of products based on the movie that includes dolls, action figures, accessories, and other products. Hasbro, meanwhile, will produce plush toys, electronics, and role-play items, and a KPop Demon Hunters version of Monopoly Deal, a card game.

Mattel stock rose on the news, as the tie-up could be a bigger deal for that company than for Netflix. Mattel is much smaller than Netflix, with a market cap of just $6 billion.

What it means for Netflix

The toy partnership is likely to be Netflix's biggest cash grab in consumer products yet, and it could pave the way to more spin-offs for KPop Demon Hunters. An obvious one would be a live concert tour of songs from the movie. The music has been key to its popularity, and like Disney's animated musicals, is likely to become part of the popular zeitgeist.

For Disney, movies like Frozen have had incredible staying power, continuing to make new fans who were born years after the debut. The same could be true for KPop Demon Hunters, and a sequel could also be in its future.

Whatever happens, investors shouldn't underestimate the potential effect on Netflix's bottom line. The experience is likely to teach it some valuable lessons in building the kind of entertainment empire that Disney has created.

Jeremy Bowman has positions in Netflix and Walt Disney. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool recommends Hasbro. The Motley Fool has a disclosure policy.