Did Netflix Just Say "Checkmate" to Disney? Why Investors Should Pay Attention to the Streamer's New Concept

Two of the biggest media companies in the world are The Walt Disney Company and Netflix (NASDAQ: NFLX) .

For years, just mentioning the word "Disney" brought to mind the company's global theme park business. However, a few years ago Disney decided to branch out from its core businesses and compete with Netflix more directly.

The company launched its own streaming service called Disney+, a move that forced Netflix's hand when it comes to creating enticing original content. While the two media giants have been fiercely competing with one another in streaming for years now, I think Netflix may have just conjured up an idea that even Disney's famed creatives didn't see coming.

Let's dig into what Netflix has up its sleeve and explore why the company may leave Disney in the dust.

Netflix's new business

While its intellectual property (IP) catalog isn't as robust as Disney's, Netflix has definitely built some brand recognition thanks to hit television series such as Stranger Things , Squid Game , and Bridgerton . However, unlike Disney, Netflix lacks that next dimension allowing fans to connect with their favorite characters and content on a deeper level. Until now.

The company's new concept, Netflix House , will boast recreations of sets from some of the company's most popular shows, giving consumers a more physical and experiential opportunity than just viewing. Netflix House is slotted to formally launch in 2025 at two mall locations: Dallas and King of Prussia, Pennsylvania.

Image Source: Getty Images

Why Disney should be concerned

The table below breaks down Disney's Parks & Experiences business during the past few quarters.

Data source: Investor Relations.

During the past year, revenue and operating income have trended in the wrong direction for Disney's park business. While I understand that theme parks and experience-oriented businesses are prone to seasonality , the financial results shown above hint at deeper issues.

Although lingering impacts of inflation have taken a toll on the consumer, Disney hasn't really demonstrated an ability to connect enough with people and get them back to its parks in a profitable way. By contrast, Netflix House isn't going to be a traditional theme park, per se. There aren't going to be rollercoasters and countless experiences that take a full vacation to complete.

This approach will keep Netflix's capital expenditure (capex) investment much lower compared to building new rides at Disney World. Although pricing for Netflix House hasn't been revealed, I'd wager that these experiences will be much more affordable than the average trip to Disney World . To me, a less exhausting and time-consuming experience at a lower cost is much more appealing to many families than a pricey vacation at Disney World.

Is Netflix the new Disney?

At its core, Disney is an experience-based business first and a streaming service second. Netflix is the opposite. Although Netflix may have pioneered streaming, the company is swiftly evolving into a full-blown entertainment business .

I see Netflix House as a savvy alternative to Disney's parks, fulfilling many of the same consumer wants and needs: namely, connecting with a brand that they love. Similar to Disney World, I think Netflix House will help build stronger brand equity and customer loyalty for the streaming giant in the long-run.

These immersive experiences could entice Netflix customers to continue renewing their subscriptions in anticipation of finding their next favorite show and experience. In turn, this should improve the dynamics of Netflix's customer lifetime value (LTV).

In a way, I think Netflix House will end up serving as a funnel for the subscription business by bringing in new customer demographics . By contrast, I don't think Disney World is necessarily enticing people to sign up for Disney+, especially when the attendance at the parks appears to be decreasing.

I'm excited to see how Netflix House is received and how it affects the company's growth. Investors may want to consider moving on from Disney as the business stalls at a crossroads and consider a position in Netflix as the company's next chapter begins.

Adam Spatacco has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Walt Disney. The Motley Fool has a disclosure policy .