In this Market Foolery segment, host Chris Hill, Million Dollar Portfolio's Jason Moser, and Stock Advisor Canada's Taylor Muckerman weigh in on the significance of Netflix's (NASDAQ: NFLX) latest advance in the original content wars: its purchase of Millarworld. The company, founded by the highly regarded Mark Millar -- who also did plenty of books with DC Comics and Marvel -- brings with it properties like Kingsman and Kick-Ass, which have been adapted into movies. Content is king, and this deal -- the first acquisition ever by Netflix -- brings plenty.
A full transcript follows the podcast.
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This podcast was recorded on Aug. 7, 2017.
Chris Hill: Netflix is getting further into original content, and for that they need original content. And today they went out and bought some. Netflix is acquiring Millarworld, which is the publisher behind franchises like Kingsman: The Secret Service, Kick-Ass, and Wanted, which all started in print form and ended up being a pretty successful set of movies. I don't want to say this is akin to Disney buying Marvel, but it is in the same vein. The Marvel Universe is so vast and so deep. This is sort of like a miniaturized version of that, though, I think, in terms of the characters and stories they have in the acquisition of Millarworld, and the ways that they can use it.
Jason Moser: Yeah, it's a page right out of that playbook. It's like we say every quarter, content is king, and I think this really does back that up. It's no secret that Netflix is moving more and more into original content, and this gives them an interesting avenue into that IP which certainly can carry a longer life due to the animated nature, at least in its original form, it can go a million different directions and we've seen that with things like Marvel and Lucasfilm and even Pixar, to a lesser degree, with Disney. It's interesting that it's their first acquisition. I was actually a little surprised by that, just because I hadn't really thought about it, but I guess that does make sense. I don't know that they've done any real acquiring.
Tylor Muckerman: It's pretty astounding organic growth, then, for the past decade or so.
Moser: It is. It does really speak to the success that the business has had to date, and how well they've really done building out a platform that everybody uses as a sort of a must-have now. This gives them another way to really separate themselves from the competitors in the space. That's really what's differentiating any of these. I think we're at the point now where TV is basically a streamable product, and that's how people are getting their offerings, and it's a matter of what content you like and signing up for the services that provide that content. I'm not really very well-versed on Millarworld or the content that comes from it, but it seems like it has enough interest to where Netflix sees a future.
Muckerman: Yeah, I'm not too familiar with it, either, but I do know the last couple movies they've made have brought in $300 [million] to $400 million. So, it's nothing to bat an eye at. I wonder if they're going to produce a movie and then sell it externally, or if it's all going to be Netflix-only content, where you have to be a subscriber to get access to it.
Hill: I think it's worth revisiting the point that you made earlier, Taylor, which is, all the more impressive that Netflix has made it this far on original content that they have not owned. And what that means is going out and talking to showrunners and creators and that sort of thing. Now, I think, with this acquisition, Netflix is in a fantastic position, because there are absolutely going to be people they've already worked with that are going to be interested in this source material. So, it's not a situation where they're basically taking meetings with people saying, "OK, tell us what your ideas are." With this purchase, they have the ideas. They have the intellectual property. And now, it's an even better position to be in, where you're essentially fielding offers from showrunners, saying, "You've got the Kingsman property? Here's my idea for a four-season-length show that can be rolled out over the next five to six years."
Muckerman: Yeah, they don't have to stick with movies, that's the great thing about it.
Moser: Yeah, just like with Disney, you can use those properties, take a Kingsman movie and develop backstories for characters and take them in all different directions a la Disney. It really is, I don't want to say limitless, but it certainly has to feel that way, at least at this point, in that they can go a number of different directions with it. I think what Netflix does so well, what they've always done so well, and this is because they were really such an innovator in the space, is they use data to figure out what viewers want. They wouldn't go making this acquisition willy nilly, I don't think. This wasn't something to say, "We're going to stake our claim on some IP and then say we have IP." They went into this knowing that there were people that wanted to watch this stuff. You don't make a deal with Adam Sandler to make six Adam Sandler movies without knowing that people want to watch them. I'm still fascinated that there's such a demand for him out there, but nevertheless, that's the case. I'm certainly they did the same thing here.
Hill: Oh, yeah. Two Kick-Ass movies, the Wanted movie, which came out in 2008, and the second Kingsman movie is coming out in theaters later this year, I'm assuming the first one has already been on Netflix, so yeah, to your point, they've already got all of the data on those four films, and how many people are watching them, rewatching them, and how big the universe of people who have watched one, or more than one, all that sort of thing.
Moser: So, really, I think we probably need to shift this, now data is king, and content is just the result. Right? Data is really what it all comes down to. You get the data, and then you make the content.
Hill: Is that it?
Moser: But can you make the content without the IP?
Hill: You have to start with the content.
Moser: We could go all day with this.
Hill: Oh, let's not.
Muckerman: Check, please.
Hill: That's why we have Bill Barker.
Moser: Point well taken.
Chris Hill owns shares of Walt Disney. Jason Moser owns shares of Walt Disney. Taylor Muckerman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy.