Netflix (NFLX -1.18%) has transformed the entertainment industry by making your living room the center of entertainment.

By disrupting the industry first through DVDs by mail and later video streaming, Netflix has allowed anyone paying a modest monthly fee to enjoy a smorgasbord of movies and TV shows without even having to get up from their couch. Along the way, the movie theater industry has been decimated, and the silver screen has lost its primacy.

However, after staking its business on digital technology for so many years, Netflix now seems poised to tap into a business it has long shunned: brick-and-mortar experiences.

A Netflix movie being advertised on a wall.

Image source: Netflix.

Netflix House is coming

According to Bloomberg, Netflix is planning new destinations where fans of shows like Stranger Things and Squid Game can go to have thematic, immersive experiences built around retail, dining, and things like a Squid Game-based obstacle course. 

This is the first time the company is building permanent brick-and-mortar locations that will serve as extensions of its brand. The new spaces will be called Netflix House, and the company is expected to open the first two in 2025, expanding the concept globally from there.

Thus far, Netflix has dabbled in pop-up style experiences, which recently included a Bridgerton-themed ball, with drinks, dancing, and costumes inspired by the royal-themed show.

Netflix has also experimented in the past with consumer product promotions, making a Stranger Things-branded frozen pizza, and a tie-in with Nike on a Nike x Stranger Things shoe release. It also has a pop-up retail store in Los Angeles, testing demand for its branded merchandise.

Borrowing a page from Disney

Netflix has taken a different course to industry leadership than the legacy studios, and that's partly why the streaming giant hasn't really tapped into the power of experiences and consumer products. However, its legacy media peers offer plenty of evidence that this is a tried-and-true strategy for increasing customer affinity and growing profits.

Walt Disney offers the best example of how entertainment supports experiences and vice versa, but it's not the only major studio to operate from that playbook. Comcast, for example, has five Universal Studios theme parks, and there's plenty of branded merchandise that stems from popular movies and TV shows from the Hollywood studios.

For Disney, its Parks, Experiences, and Products segment now drives the majority of its profits, contributing 77% of segment operating income in this fiscal year so far, and the House of Mouse is literally doubling down on that business, saying it would nearly double its capital expenditures on theme parks over the next decade to around $60 billion.

A natural next step

Netflix doesn't need to build out its own theme parks to tap into the real-world magic inspired by its content. The Bridgerton ball is a good example of what Netflix can do here, bringing unique experiences for fans that they can't get anywhere else.

It's clear by now that Netflix's programming, on which it spends roughly $15 billion a year, deserves more than just to be stuffed into your living room TV screen, where its menu can show only a handful of the thousands of titles at once.

Netflix fans, like those who travel to Disney World and other theme parks, want to have immersive experiences with the characters and storylines that they love, and tapping into that demand should improve subscriber retention and add a new revenue stream. Netflix also has an easy way to advertise such experiences on its streaming platform. For example, it could easily include a teaser for the Bridgerton ball once viewers start watching the show. Co-CEO Ted Sarandos shared on the recent earnings call that there have been dozens of marriage proposals at the Bridgerton events, showing how deeply it's resonating with fans.

Management sees the Netflix House project as a way to support its content, rather than a new revenue stream, but that could change as it evolves.

The company also has another experience-based opportunity sitting right under its nose. It could host theatrical showings of some of its movies and TV shows at the Netflix Houses. They could even be accompanied by Q&A with stars or directors, and the company could host select sneak previews of upcoming seasons for fans of certain shows, charging extra for the privilege.

Such events would further encourage community among fans, who have until now mostly enjoyed their favorite shows and movies alone.

For comparison, Disney is set to bring in roughly $10 billion in operating income from Parks, Experiences, and Products, showing there's a huge market for content-related products and experiences.

Netflix isn't about to open six global theme parks, but the streaming giant is taking a good first step with Netflix House. It will be years before this new concept has the potential to deliver meaningful results on the bottom line, but it's the latest evidence that Netflix isn't afraid to break the mold that made it so successful in the 2010s but is now looking staid.

Its decisions to crack down on password-sharing and launch an advertising tier are paying off as the post-earnings pop stock shows, and Netflix Houses should also yield a return for the company, both financially and in building its brand equity.

Viewed as part of a broader push to grow the company beyond its traditional streaming platform, it's another reason to buy Netflix stock.