How profitable are derivatives? Streaming giant Netflix is also about to start dabbling

although there are more than 100 million paying users, the streaming giant seems to be "dissatisfied with the status quo" and is trying to transform itself into an one-stop entertainment empire. In other words, Netflix also wants to be Disney. "rushing out of the living room and into physical products" is an important step in the transformation of Netflix.

two months ago, Disney accidentally abandoned its partner Netflix, which had been holding hands for less than a year, and announced that it would launch a direct consumer-oriented streaming service to compete head-on with Netflix. Recently, instead of holding a grudge against its predecessor, Netflix came up with the idea of turning its IP into a commodity like Disney.

compared with Disney, which has a lot of business, Netflix has always focused on one thing, that is, streaming services. Since the launch of House of Cards, its original content has not only been praised by people in the industry, but also won the favor of the audience. Why did Netflix suddenly enter the derivatives market? How profitable are derivatives?

strong > more than 100 million paying users are not satisfied. Netflix is also going to do derivatives. / strong >

High-quality content brings a large number of users to Netflix. According to the third quarter report of Netflix, the total number of global users of Netflix has reached 109.25 million.

Last year, Netflix teamed up with British brand Topshop to launch a series of "Strange things" derivatives, including clothing, shoulder bags, car caps, suitcases and Q-version dolls of the protagonists. This year, Netflix's intentions in Nuggets derivatives are even more obvious, with the acquisition of Millarworld, a comic book publisher, to profit from derivatives such as comics and toys.

in a recent video, Netflix CEO Reed Hastings wore a Christmas sweater based on "Strange things" and acted as a "costume model", hoping to attract fans of the hit show. In addition, Netflix has licensed three board games and even launched a talk show in which fans can discuss the latest plot.

strong > how profitable are derivatives to attract streaming media giants? / strong >

for Chinese video websites, the 100 million paying users of Netflix are difficult to reach in a short time. However, why is Netflix, which has more than 100 million users, dissatisfied with the status quo and wants to get a piece of the derivatives market? The answer is simple: the profits of the derivatives industry are very attractive and can be said to be a huge piece of "fat meat".

when it comes to the originator of film derivatives, it can be traced back to Mickey Mouse kettle in the 1920s. At that time, a businessman wanted the image of Mickey Mouse to appear on his product, which inadvertently created the first film derivative. However, it was not until 1977, when the first Star Wars film was released, that filmmakers really realized the great potential of derivatives.

according to George Lucas, director of Star Wars, after the Star Wars movie hit, they accidentally found that fake lightsabers were very popular among teenagers at that time, and they realized the lag in derivatives development. In the late 1970s and early 1980s, Star Wars licensed derivatives grossed more than $1 billion worldwide, prompting Hollywood studios to imitate each other, thus ushering in the era of derivatives.

until recent years, Star Wars derivatives were still a piece of fat. In 2012, Disney bought the rights to "Father of Star Wars" Lucasfilm and the Star Wars series for more than $4 billion. In 2013 and 2014 alone, Star Wars derivatives generated $4.6 billion in revenue for Disney. According to statistics, the Star Wars series generated a total of $32 billion in derivatives revenue, far exceeding the $7 billion in box office receipts generated by the series itself.

in addition to Star Wars, there are many successful precedents for derivatives sales. For example, the Transformers series, the Mini Yellow Man series and Disney's animated films all have long-term, stable and huge derivatives revenues. Less than a year after the release of the animated Disney film Frozen, 3 million princess dresses worn by its protagonists have been sold nationwide (priced at $149.95), earning about $450 million, according to US media reports. Disney executives have said publicly that the film could generate $1 billion a year for Disney.

after years of development, Hollywood has formed a set of mature derivatives development mechanism. Whether it is superhero movies such as Batman and Iron Man, or animated films such as Racing Story and Wall-E the Robot, product development has been under way even before the film is filmed. According to industry insiders, derivatives revenue in the United States currently accounts for 70% of total film revenue, including toys, games, pay-TV, disc distribution, etc., which is far more than twice the film box office.

strong > what experiences does Disney have for reference in Nuggets derivatives market? / strong >

seeing Disney and other entertainment giants making a lot of money from derivatives, Netflix naturally doesn't want to let go of this piece of fat. For now, Netflix doesn't have much experience in derivatives development. So, what experience does Disney have in derivatives development that Netflix can learn from?

1. Stories and characters deeply rooted in the hearts of the people

if film and television derivatives are to sell well, first of all, this film and television work must be very marketable, and stories and characters must be deeply rooted in the hearts of the people. If the work itself is of mediocre quality, the derivatives will not arouse the audience's desire to buy. Disney's derivatives sell well precisely because most of its films are marketable and recognizable.

take Frozen, for example, which in itself is a very successful animated film, grossing $1.272 billion at the global box office. From the point of view of the story, the film broke the story tradition of Disney's "Hero Save Beauty" and showed the audience for the first time that the most precious thing was not grandiose love, but the friendship between sisters, which surprised audiences who were used to Disney routines.

more than 100 million paying users are not satisfied, Netflix is also going to do derivatives

on the other hand, the character image of Frozen is very clear. Aisha transformed from a repressed and conservative princess into a beautiful, elegant and confident ice queen. Princess Ann is cheerful and lively, brave and kind, and her characters are also very plump. What is more worth mentioning is that the characters of Aisha and Anna are beautiful, which can easily arouse the interest of young audiences to imitate.

in order to make the stories and characters of the film more deeply rooted in the hearts of the people, Disney will also carry out a series of promotions, such as the promotion of songs, the performance of stage plays, the construction of projects in theme parks, and so on. For example, the theme song "Let it go" of Frozen was widely distributed in 25 languages and won an Academy Award for Best original Song. These acts of cooperation with publicity also strengthen the image of virtual characters in the hearts of consumers, making them more "fresh".

2, Creative Derivatives Design

even with deeply rooted stories and images, derivatives must be creative in design if they want to stimulate consumers' desire to buy. First of all, it is necessary to find a combination with IP to give derivatives a differentiated competitive advantage. Secondly, the design techniques should also be rich, which can cover different age groups.

according to China Business Daily, when Disney is designing derivatives, animators have to hold numerous meetings with people in the consumer products department to list the main characters and draw thousands of story structure diagrams before they can determine the major images that can be used as authorized consumer goods in the future. After determining the character, Disney will reverse the mold opening, production process and execution according to the time of the film's release, so as to ensure that derivatives are sold in Disneyland or stores at the same time as the movie is released.

it is worth mentioning that Disney will also try to add local elements to derivatives to attract consumers when developing derivatives. For example, in Disneyland in China, Mickey Mouse can be found wearing a Tang suit, Donald Duck wearing embroidered shoes, and Sleeping Beauty wearing a red head rope. Such localization actions can easily arouse the attention and pursuit of Chinese consumers.

in addition to ordinary dolls, dolls, clothing and jewelry, Disney will also develop some seemingly "picturesque" derivatives, such as Mickey tea sets, Captain America-style floor-sweeping robots, and even vocabulary books that "Da Bai teaches you to memorize words". These seemingly strange derivatives enrich the variety of Disney derivatives and provide consumers with more choices.

3, make a profit through image licensing

in addition to independent development, image licensing is also the main way for Disney derivatives to make money. It is reported that Disney will charge a certain license fee plus a share of sales for the co-licensees. Disney also determines whether to continue to grant licenses based on partner sales data every year. Disney will also give some guidance to many licensed products.

for example, one of the derivatives created by Star Wars 7, the spherical robot, is a partnership between Disney and SPHERO, a young startup. At the time, the company was less than five years old and had been working on producing remote smart balls, but few people were interested in its products. After being selected by Disney, SPHERO released a toy version of the new robot BB-8, which quickly sold 20, 000 units. The spherical robot was also rated by Forbes as the best Star Wars derivative ever.

according to industry insiders, Disney has six theme parks, more than a dozen film and television production companies, hundreds of media and more than 900 Disney stores, and has become the world's largest licensee of goods, with annual total authorized product sales of about $30 billion. The huge profits from image licensing have become a major profit point for Disney derivatives.

4, build a global retail network system

the hot sales of Disney derivatives are not only of excellent quality, but also related to Disney's sales network. It is understood that Disney has established a huge global retail network system. For example, during the hit period of Frozen, dolls based on the film's characters were randomly shipped to Amazon, Wal-Mart, eeBay and other retail stores. In Wal-Mart alone, there are more than 700 different types of "Frozen" toys. Viewers who have watched Frozen will soon find different styles of derivatives in these malls, making it easier to stimulate the audience's enthusiasm for buying.

of course, Netflix, which soon tested the derivatives market, can hardly catch up with Disney in a short period of time. However, after learning from Disney's experience and experiencing its own exploration, I believe there will be some gains. After sharing this piece of "fat meat", the taste will be extremely delicious and rich.

Edit: mary