Yesterday, Netflix made a fascinating announcement: that it was buying a comics company. For an undisclosed sum, the streaming giant had snapped up Mark Millar’s Millarworld - a move which means Netflix now owns properties like Wanted, and Kick Ass, both of which were adapted into moderately successful films.
The reason for the acquisition is surely pretty obvious: now Netflix has access to a library of stories, characters and intellectual property that it can mine for its TV productions, without having to pay anyone else for the rights. If it can make a TV version of Kick Ass as successful as, say, Daredevil, it’ll be raining money in their office.
The drivel of Hell's Kitchen.
What’s perhaps more interesting then, is what this acquisition tells us about the broader strategic context of where Netflix sees itself - and how the balance of power in the technology and entertainment industry is changing.
Most strikingly, though Netflix has done its best to completely shake up the entertainment industry, what this news shows is that Netflix is also learning from the OG: The Walt Disney Corporation.
House of Mouse… And Stark… And Skywalker
Under CEO Bob Iger, Disney has experienced something of a renaissance.
In 2016, Disney became the first film studio ever to gross over $3bn at the American box office - thanks to several big hits: Captain America: Civil War, Finding Dory, Zooptopia, The Jungle Book, and Star Wars: Rogue One.
It was the culmination of several years work - and some hefty acquisitions. On Iger’s watch the company paid $7.4bn for Pixar, $4bn for Marvel, and $4.06bn for LucasFilm - and the box office success shows that these bets are paying off.
Over the last few years it has pumped out a steady stream of enormous hit films. Each year now until the end of time, we can probably expect a Star Wars film, a live action remake of a classic Disney film, a new CGI film or two from Pixar, several instalments of the Marvel Cinematic Universe, and if we’re lucky, maybe something original too. From a distance, it can almost look as if the company has figured out a scientific formula for making a blockbuster hit (at least, until you move close enough to spot Tomorrowland).
Disney has a vast intellectual property empire.
What Iger realised, as The Economist noted, was that they money doesn’t come from owning the cameras or the computers that make movies - but from the characters and stories that audiences love. Disney didn’t go on a spending spree because it wanted Industrial Light & Magic’s visual effects skills, or Pixar’s rendering engine. It spent big because it wanted to own Iron Man, Darth Vader and Buzz Lightyear.
In the same time period it has also picked up many smaller properties including The Muppets, Saban (which makes loads of kids shows), and Maker Studios - management company of many of the most popular YouTube stars.
In short, Disney made the calculation that while technologies and platforms will change over time, the actual characters are what is priceless.
And this brings us back to Netflix.
House of Cards
Netflix is now one of the biggest players in the entertainment industry, and part of the reason it has managed to muscle in between the likes of Fox, Viacom, Time Warner and Disney is because of its disruptive technology. Streaming technology has transformed the way we consume media. Seemingly overnight (though in reality it did take a little longer), it destroyed the market for DVDs and even put a dent in piracy. It also upended the burgeoning online download market, by offering a selection box of films for a flat monthly fee too. Today it has over 100 million subscribers.
As time went on, however, it exposed a potentially fatal flaw in the Netflix business model: it relied heavily on the catalogues of film and TV companies to bulk up its on-demand database, and the technology it pioneered is now commodified. So, disastrously, Netflix’s own formula could have worked against it. Why would film and TV companies want to allow their content to bulk up Netflix’s offering? And anyway, couldn’t they just make their own equivalent to Netflix?
Nobody cares about the technology unless there's something good to watch.
In fact, there are persistent rumours and speculation that building its own Netflix-style service could be Disney’s next move. And if Disney were to offer its own service as the only place you can watch, say, Star Wars, Marvel and Pixar content (and everything else from its enormous content back-catalogue), that would pose a huge challenge to Netflix itself.
Netflix, of course, already knows this. This is why it has gone out of its way since 2013 to pour hundreds of millions of dollars every year into original series. Whatever other fights the company gets into with content providers in the future, no one will ever be able to take away House of Cards and Orange is the New Black, and so on.
In fact, in 2013, the company’s Chief Content Officer Ted Sarandos summed this up in what became a prophetic comment: "The goal is to become HBO faster than HBO can become us."
Since then, HBO, the American premium cable channel that is responsible for prestige shows like Game of Thrones has launched its own streaming service, HBO Go, which, apart from the shows available, is functionally very similar to Netflix.
Kick Ass Content Wanted
With this context, it is easy to see how the Millarworld acquisition fits into Netflix’s broader strategic aims: it is another upgrade in the content arms race, and Netflix hopes that by using Mark Miller’s characters and stories, it will be able to maintain creative parity with Disney, Amazon, Time Warner, Universal - and every other big media company out there.
So I wouldn’t be surprised if we see more Netflix acquisitions in the future. What’s particularly curious is that as a result of the deal, super high-tech Netflix has inadvertently found itself the custodian of a legacy print comic publishing business. In a sense, this also gives it an unexpected parity with its rivals: Disney, of course, owns Marvel - and DC is owned by Time Warner.
It’ll be interesting to see if Netflix embraces the role of media conglomerate, and perhaps buys up more companies in tangentially related industries, or whether ultimately it is still only about serving the central video platform. How about getting into game streaming - either Twitch or PSNow style next? The company clearly has the infrastructure to handle it.
And one final piece of wild speculation off the back of yesterday’s news: as discussed above, Netflix has taken the same strategic direction as Disney - and doesn’t this intensify the collision course the two companies are on? And if so, what will that mean for the wildly successful Defenders Netflix shows? Will Disney really want its bankable intellectual properties on a rival platform if it does go down the streaming route? And wouldn’t Netflix prefer to spend its cash on raising the profile of its own cast of comic book heroes and villains?
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