The blockbuster deal announced early Wednesday gives Netflix rights to the prolific author’s entire catalog — and a potential way into several businesses outside Netflix’s core work of series and films, including gaming, live events and merchandising. It also marks the latest and potentially largest investment for Netflix in creating an IP-based universe that it owns outright.
While terms of the deal weren’t disclosed, it is all but certain to be the biggest IP acquisition deal ever for Netflix, given its historically light dealmaking.
The company acquired comics creator Mark Millar’s MillarWorld in 2017 — the value of that deal was pegged at between $30 million and $50 million — and acquired the kids’ brand StoryBots in 2019 (for a price that was reported as “immaterial”), but with intellectual property like Charlie and the Chocolate Factory, Matilda, The Fantastic Mr. Fox, James and the Giant Peach, and The BFG, the Dahl company is by far its highest-profile content acquisition.
Netflix has been in the Dahl business for the past three years, having paid a reported $1 billion to acquire rights for animated series and specials based on 16 of Dahl’s stories, including Charlie and the Great Glass Elevator, The BFG, The Twits, George’s Marvellous Medicine and The Enormous Crocodile. While that deal has yet to yield any titles on the streamer, Netflix noted in its announcement Wednesday that a series based on the world of Charlie and the Chocolate Factory from Taika Waititi and Phil Johnston (Wreck-It Ralph) and an adaptation of Matilda the Musical (in partnership with Sony and Working Title) are in the works.
More than just series and films, though, Netflix says it plans to use the acquisition of the Dahl company as a vehicle for “the creation of a unique universe across animated and live-action films and TV, publishing, games, immersive experiences, live theater, consumer products and more.” The company has recently made a push into gaming and is exploring the live-event space as well: In extending and expanding its deal with Shonda Rhimes, Netflix included live events and experiences in the pact.
The “unique universe” portion of that statement from Netflix co-CEO Ted Sarandos and Roald Dahl Story Company managing director Luke Kelly (the author’s grandson) is likely the key to the deal, however. Where legacy media companies have decades’ worth of IP they can use to create interconnected franchises, Netflix has hit some bumps in its own efforts on that front. Millar’s Jupiter’s Legacy, the planned beginning of a multiseries superhero franchise, was canceled a month after its debut. Marquee showrunners like Rhimes and Ryan Murphy, who created multishow franchises at previous studio homes, haven’t done so yet at Netflix (though Rhimes’ Shondaland is developing a spinoff of breakout hit Bridgerton).
Netflix vp finance and investor relations Spencer Wang, who oversees M&A for the streaming giant, outlined the company’s philosophy on acquisitions in July. “If some of these content assets are heavily encumbered, and limit our ability to use them on Netflix, then they are of limited value to us, since our top priority is to grow the core Netflix business,” he said at the tail end of the company’s earnings call, adding that they use an internal test to determine whether the money required to buy asset x cannot be better spent elsewhere.
“It has to accelerate our strategy with low distraction costs,” Netflix CFO Spencer Neumann added. “We are pretty picky.”
The Dahl acquisition seems to fit the bill: Netflix now owns a broadly popular set of titles from which it can create series, films and other content, in keeping with the company’s mission to be all things to all of its 200 million-plus global subscribers.
On the other side of the deal, Netflix’s purchase could be the equivalent of a golden ticket for the Roald Dahl Story Company. According to U.K. financial filings for RD Payments Limited (the holding company that houses RDSC), the company had revenues of £25.77 million ($35.2 million) in 2019, and £23.98 million ($32.81 million) in 2018. Operating profits were £13.1 million in 2019, and £12.6 million in 2018. The company also made charitable donations valued at almost £1.5 million in 2019.
According to the filing, a key driver of the revenue was “a significant TV production contract which secures income for several periods.” That would be Netflix’s 2018 agreement to develop content based on the Dahl characters and world.
Of course, the real treasure of the Dahl deal is intellectual property. The rights to Dahl’s characters and worlds have significant value beyond annual licensing fees, particularly to a company like Netflix.
The filing also includes a letter from the company’s directors outlining the importance of expanding the company’s scope. “New TV productions and feature films are important to introduce new generations to the worlds of Roald Dahl, and to build a consistent brand identity which can be rolled out to other areas of the business,” the filing says.
Pending completion of the deal, RDSC says its current team will stay in place, and it will operate as an autonomous unit at Netflix.