Netflix (NFLX 1.10%) completely revolutionized the way content is consumed. While the company originally began as a DVD rental service, Netflix quickly pivoted to a streaming model.
For years, other media companies have tried to catch up and build their own streaming platforms. Outside of Netflix, some of the more prominent streamers come from industry giants like The Walt Disney Company, Warner Bros. Discovery, and Amazon.
In my opinion, many of the streamers above only produce a couple of shows that you might watch once per year. So, how do these services acquire users and keep them sticky?
For a long time, the answer to that was assessing which platforms had the best original content. After all, in today's world, companies pay a premium for your attention. Considering how crowded the streaming realm has become, Netflix has swiftly pivoted once again.
While the competition is busy developing new television series with big celebrity names attached, Netflix is doing something different. Let's break down how Netflix is evolving from a run-of-the-mill streaming service to a full-blown entertainment conglomerate.
NASDAQ: NFLX
Key Data Points
Netflix is moving into live entertainment
One of the biggest knocks against streaming, in general, is that audiences often have the option to watch an entire television series in one sitting. Although binging content offers some convenience, it often leaves you wanting more -- as you now need something new to watch.
Recently, Netflix has made an effort to move into live content. In other words, the platform is releasing content that you can tune into live -- just like real television. While this strategy is in its infancy, early indications are showing that it's resonating with audiences.
In early May, Netflix produced a live comedy event called The Roast of Tom Brady. The star-studded event captivated viewers as comedians, celebrities, and professional athletes joked about former NFL quarterback Tom Brady.
According to media outlets, the comedy special was viewed 2 million times on its opening night. In the week that followed, the show has now been viewed nearly 14 million times and is the No. 1 streamed show on Netflix's English TV library.
What's even more encouraging is that Netflix has a deep roster of other live events that it intends to sprinkle throughout the remainder of 2024.
In July, Netflix will be livestreaming a boxing match featuring social media sensation Jake Paul and boxing legend Mike Tyson. Between Instagram and YouTube, Jake Paul has over 45 million followers. Moreover, Paul is a co-founder of a sports betting app called Betr. Between Paul's fans and the rising popularity of sports betting, I am optimistic that the bout with Tyson will draw similar viewership to that of the Brady comedy special.
Lastly, Netflix just announced perhaps its biggest splash in the live entertainment landscape. For the next three years, Netflix will be livestreaming the NFL's Christmas day games. In 2023, the NFL aired three games on Christmas day, and each of these games averaged over 25 million viewers.
Clearly, the idea here is that Netflix entices new viewers to sign up in order to watch live events. Thereafter, once these new members are on the platform, it'll be on Netflix to curate content for these new subscribers so that they remain sticky.
Image source: Getty Images.
Bringing immersive experiences to the audience
Another new initiative at Netflix is its foray into immersive experiences. While these are not theme parks per se, Netflix Houses are brick-and-mortar locations that allow fans to experience recreations of sets of some of its most popular series.
I see this as Netflix taking a page right out of Disney's playbook. Disney has built an unparalleled level of brand equity from fans around the world. One of the reasons Disney resonates with fans is that it brings its beloved movies to real life through its theme parks.
I think Netflix House is a creative strategy because it will not require the same capital investment as a theme park. At the same time, it helps deepen fans' relationships with Netflix's content by providing them with a way to experience their favorite shows on a new level.
Is Netflix stock a buy right now?
The chart below illustrates the price-to-sales (P/S) ratio among some media and entertainment companies. Based on a P/S of 7.8, Netflix is by far the most expensive stock in this cohort.
NFLX PS Ratio data by YCharts
This isn't entirely surprising. Netflix shares have soared 80% over the last year. By comparison, Disney has struggled to gain momentum in the streaming landscape. Moreover, the company was the center of an activist investor battle earlier this year -- a move that likely caused some internal turbulence at Disney and was ultimately a distraction from its growth roadmap.
While Netflix stock is indeed a bit pricey, I see it as a compelling buy for long-term investors. In a way, I think Netflix is evolving into a new-age version of Disney. But it's different because the company's entertainment spans across many genres and demographics -- as opposed to Disney's predominantly family-friendly image.
Investors with a long-term horizon may want to consider scooping up some shares of Netflix, as the new growth narrative appears to be just be starting.
