Walt Disney (DIS 0.33%) has a well-told history when it comes to success with TV and movie franchises. From The Muppets and Toy Story to Marvel and Star Wars, the company controls a deep bank of properties and connected characters, providing it ample opportunities to create an array of content and tie-in products. For example, 2015's Star Wars: Episode VII: The Force Awakens made more than $2 billion at the global box office, while Star Wars toys generated almost $760 million in revenue the following year.
Netflix (NFLX 2.72%) has just a fraction of Walt Disney's character-driven IP. Netflix does have a line of Stranger Things merchandise and mobile games, but the company is still relatively new to the franchise space and all the opportunities it represents. However, with Netflix Originals like last year's Army of the Dead and the recently released The Gray Man, Netflix is starting to build its own cinematic universes.
With this in mind, there's a lot Netflix can learn from Walt Disney about creating profitable brands that fans fall in love with.
Audiences like straightforward stories populated by diverse characters
At the core of many Walt Disney films and TV shows is a simple premise: Good characters are trying to overcome bad ones. It has been a part of the company's storytelling DNA since 1938's Snow White and the Seven Dwarfs and is still at the center of pretty much every Marvel and Star Wars property (the Avengers taking on Thanos, the Jedi versus the Empire, etc.).
Additionally, Walt Disney has also come to understand that, while the motivations of heroes and villains don't have to be complex, it's good business to present diverse characters on screen. In 2018, Hasbro produced more toys to accompany the release of Black Panther than it had for any other Marvel film focused on a single superhero. The toy maker noted it increased manufacturing after the film's launch to keep up with demand.
Expansive mythologies provide scope for an array of new movies and shows
Walt Disney has leveraged Star Wars' literal galaxy of characters to create an array of new shows and movies over the years. From 2016's Rogue One to The Mandalorian a few years later, Walt Disney has developed whole new story threads that, while connected to the original Skywalker saga, are still stand-alone entertainment on their own. And with each new property comes the possibility for even more merchandise and spinoffs -- such as the upcoming Andor and last year's Book of Boba Fett.
It's OK to reset if things aren't going well
Perhaps the biggest threat to any successful franchise is that stories and characters can become stale, causing fans to lose interest. 2014's X-Men: Days of Future Past pulled in roughly $746 million in worldwide box office receipts, while 2019's X-Men: Dark Phoenix managed a little over $252 million.
While X-Men is a Marvel property, Walt Disney didn't control the film or TV rights during the development of either project. However, Walt Disney now oversees X-Men and has announced it is rebooting (or resurrecting) the franchise with a new show linked to X-Men: The Animated Series, which debuted in the 1990s.
Netflix has many opportunities ahead
Walt Disney has been around for close to 100 years. That's a lot of time to build and acquire brands, learning what works and what doesn't along the way. So while Netflix is getting into the franchise space so much later than Walt Disney, that doesn't mean this streaming service stock can't still follow the template that has been laid out.
For investors, Netflix has shown signs it understands many of the aspects that have helped Walt Disney get to where it is: The aforementioned Stranger Things features a diverse cast and is ostensibly focused on good versus evil. The streamer followed Army of the Dead with Army of Thieves -- a prequel centered on a supporting character from the initial movie. And Netflix has also signaled it is serious about animation by acquiring studio Animal Logic.
With this in mind, it is feasible Netflix will soon have some formidable -- and very profitable -- franchises that could give Walt Disney a run for its money.