'Stranger Things' Brings Surprise Windfall to Netflix as Stars Seek Greater Share

Illo Stranger Things Money - H - 2017
Illustration By Matt Collins

With Stranger Things nominated for 18 Emmys and season two set to drop Oct. 27, the series is pulling Netflix into a new business and into a new negotiation with key players, including the show's child stars.

After the homage to 1980s horror movies became a surprise sensation in summer 2016, Netflix — with unauthorized merchandise selling on the internet — made quick licensing deals with clothing company Hybrid Apparel and retailer Hot Topic. The streaming giant subsequently began a search for an executive to run a licensing effort and in August hired Jess Richardson, WWE's former licensing vp for North America, as director of global licensing, merchandising and promotions.

A source tells THR that Netflix is making deals for the second season of Stranger Things that will dwarf the efforts of the last one. With the show returning the week of Halloween, costume sales likely will be boosted, but the main focus is the holidays. (Sources say the deals in place include agreements with Funko for collectibles, Trends International for posters and paper goods, McFarlane Toys for action figures and Hybrid Apparel for clothing.) Netflix declined comment.

The big streaming services have been primarily focused on attracting eyeballs; licensing related to shows had not been a front-burner consideration. But a source says Stranger Things has "changed the thinking" at Netflix about the potential of its shows. Most outlets that track Netflix ratings report Stranger Things as one of the most watched on the service. Says Russell Binder, a partner in the licensing firm Striker Entertainment: "Stranger Things was the first show to move the needle in terms of broad consumer demand … [for merchandise from] the streaming platforms. We anticipate that it's a good business for them." (Striker is not involved in licensing Stranger Things merchandise.)

As Netflix increasingly ramps up the number of original shows that it owns, it seems a natural evolution for the streamer to wade into licensing. Certainly the market can be lucrative. According to the International Licensing Industry Merchandisers' Association's Annual Global Licensing Industry Survey, 2016 retail sales of licensed goods based on entertainment and character properties were $118.3 billion globally, with $42.7 billion of that from sales in the U.S.

Netflix seems to be the first streamer to set up its own licensing division. Amazon Studios is, of course, owned by a giant online retailer that can sell its own merchandise, but an industry source notes the streamer might face resistance getting competitors to stock its products. Working with Sony Pictures Television, Striker is helping to build a consumer-products licensing program based on the new Amazon series The Tick. "As far as we're aware, it's one of the first series more aimed at adults to expand into a licensing program off of Amazon Prime," says Striker partner Marc Mostman.

The entry of Netflix and other streamers into licensing presents a strange new world from the perspective of licensees, who are used to getting some reassurance about the popularity of a franchise — that is, some transparency about ratings — before they commit to a deal. "The streamers have not had a lot of data out there or been willing to share it," says Marty Brochstein, senior vp industry relations and information at the Licensing Industry Merchandisers' Association. "It's a hurdle for them to overcome."

Meanwhile, knowledgeable sources say Netflix faces a possibility that some if not all of the Stranger Things child stars will band together to negotiate deals for upcoming seasons of the show. One source says kid actors Finn Wolfhard, Millie Bobby Brown, Gaten Matarazzo and Caleb McLaughlin each got $30,000 per episode for the first and second seasons with a bonus — less than six figures — once it became clear that the show was a phenomenon. While the cast is signed for six years, talent reps say a renegotiation will happen early next year. One question yet to be addressed: whether the show's breakout, 13-year-old Brown, will negotiate separately from the other young stars.

A source with knowledge of the Stranger Things world says Netflix had hoped to shoot seasons three and four back-to-back to get ahead of any potentially awkward adolescent transitions for its young actors. "Every time you have a show that relies so heavily on the charm of kids, you want to capture that," says this person.

But the powers involved — including, of course, show creators Matt and Ross Duffer and executive producers Shawn Levy and Dan Cohen — are said to have vetoed that idea. The writers room is small, as is the roster of producers, and a source says they did not deem it possible to turn out episodes that quickly. (All declined to comment.) Instead, says the source, the plan is to create stories that feel true to where the actors are, in terms of age, at the time the episodes are shot.

As for the prospect of a group negotiation, this person can't anticipate how Netflix would handle that but notes that Stranger Things clearly is the streaming service's most important franchise. "If the series has any luck at the Emmys," he adds, "that will only intensify."

A version of this story first appeared in the Sept. 12 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.