When It Comes to Intellectual Property, Netflix Has a Different Approach Than Disney

Squid Game has been a surprise runaway hit series for streaming-video giant Netflix (NFLX 4.17%). According to the company, over 142 million households had streamed the series as of its third-quarter earnings report, making it the biggest show ever for Netflix. It's the kind of success that's reminiscent of The Mandalorian for Walt Disney (DIS 1.54%).

In this video from Motley Fool Backstage Pass, recorded on Oct. 25, Fool analyst Sanmeet Deo and contributor Jon Quast discuss how Disney and Netflix have differed when handling the success of their hit shows. Disney guarded its intellectual property more, whereas Netflix is more content to let things run wild.

Sanmeet Deo: Another thing that's merging into the metaverse is entertainment and movies and film and stuff. I don't know if you guys have seen, we talked about I think, once Squid Game on Netflix, but that's become a hugely popular show. I think it's the most popular show ever. We talked about it recently. I think Jon mentioned this or we talked about it where there has been a proliferation of experiences on Roblox, specifically of different Squid Game type, experiences of games or spinoffs of experiencing that creators have capitalized on it.

I saw an interesting article, but also Netflix reported earnings last week and I talked a little bit about Squid Game and the show and its popularity. They did also talk about these things like Roblox taking advantage of this content, and putting games or experiences on their platform.

Typically, what happens you see is, some of these companies are fiercely like gaming companies or entertainment companies appear to be protective of their content and any usage of that content. They take very seriously and they might even have an army of lawyers or they are going to come and just drop a lawsuit on you saying you need to cease and desist or stop this. There is going to be few examples of things from Nintendo and Disney where they felt like their copyright or their content was being violated or used misappropriated, or not being monetized for them.

But Netflix took an interesting approach where they're fine with it. Rob Peter, he's executive at Netflix. Direct quote from him was: "It's tremendously exciting something like Squid Game blow up in the cultural zeitgeist. Then how that passion for the title shows up in all these different places. We definitely want to be part of some of that passion. But there's no monopoly on that passion. You'll see it in other places, and people sending around TikTok videos, or during their onset of many games in Roblox or things like that. I think that's great and I think we should celebrate that freedom and that excitement as well."

What do you guys think about Netflix's approach versus the approach of some of the other companies and how they've taken content usage?

Jon Quast: The example that comes to mind off hand is Disney and The Mandalorian and Baby Yoda. When that first came out, there was a lot of people creating merchandise based on Baby Yoda or Grogu, I know the real name. But [laughs] Disney didn't like that. Disney came out and said, you can't be making products and selling products based on our intellectual property.

Disney also has a very big toy business and they have partnerships with toy companies. They have licensing agreements. There is a dynamic at play already with that whereas something like a Netflix where other people are, perhaps they're getting excited about Netflix's new intellectual property. I can see where Netflix would take a more relaxed approach to that, whereas Disney really can't. It doesn't quite have the same luxury.

Deo: Yeah. Also it's not directly affecting their bread and butter of subscriber growth. In fact, it could be free marketing and it could attract people to Netflix and subscriber. They're not relying as much on merchandise sales or things like that that could be affected by something like this.

It does demonstrate the convergence of entertainment with metaverse and these experiences and how it can really play into an ecosystem of all of it. To some extent I think Netflix it's been somewhat discussed to some extent. I wouldn't be surprised if Netflix maybe acquired or built something like a Roblox to enhance their entertainment content and build off that with their gaming platform that they're building. It'd be interesting to see how that plays out.