Nike just raised the stakes for what it means to be a culturally relevant brand.
As first reported in The Wall Street Journal, Nike is pulling from store shelves its special edition Air Max 1 USA shoes that had been created to celebrate the July 4 holiday. The shoe design incorporates the image of a U.S. flag with 13 white stars in a circle, commonly referred to as the Betsy Ross flag because it was created during the American Revolutionary War. But as Nike was rolling out the shoe to retailers, the company encountered a hitch: activist, former NFL quarterback, and Nike brand partner Colin Kaepernick reportedly told Nike that he considers Betsy Ross flag to be offensive because it has been co-opted by extremist groups and because it symbolizes a time when slavery flourished in the United States.
So Nike is pulling the Air Max 1 USA from stores. As a Nike spokesperson told The Wall Street Journal, “Nike has chosen not to release the Air Max 1 Quick Strike Fourth of July as it featured the old version of the American flag” (a bland statement that misses an opportunity for Nike to articulate what it believes and why).
By heeding the advice of Kaepernick, Nike is demonstrating that its relationship with the embattled former NFL quarterback goes beyond a one-time advertising campaign. In 2018, Nike made a bold move by aligning itself with Kaepernick — then embroiled in a bitter dispute with the NFL over his refusal to bend the knee during the playing of the National Anthem during football games. The company released an ad that featured Kaepernick with tagline, “Believe in something. Even if it means sacrificing everything. Just do it.”
The ad fostered a public discussion about race, the symbolism of the American Flag, and the role of the athlete in society, mostly because of Kaepernick’s visibility and name awareness. In doing so, Nike added a layer of meaning and cultural context to its famous “Just do it” tagline — a brilliant move that resulted in Nike’s sales to jump. The ad worked for a number of reasons, namely: its audience was (and remains) receptive to brand activism and Nike has taken a stand on social issues for years. By being culturally relevant, Nike connected with its customers.
Nike could have stayed in a narrowly defined lane of relying on Kaepernick to be the face of the brand with more advertisements. But Nike has now shown that Kaepernick is more than a spokesperson. He’s a counselor affecting how the business operates.
Kaepernick is not the only one to take offense with the Betsy Ross flag. In 2016, a Michigan school superintendent issued an apology after students waved the flag during a football game. The superintendent said that the flag is “a piece of history co-opted by white supremacists who see it as a symbol of a time in our nation’s history when slavery was legal.” In addition, Twitter users began speaking out against the Air Max 1 USA along with Kaepernick.
Nike read the social signals, listened to its appointed counselor, and took action. In doing so, the company has sparked a backlash and also a discussion about the history of the American flag and its appropriation in contemporary society. Arizona Governor Doug Ducey has ordered the state to rescind financial incentives for Nike, and social media is exploding with criticism but also support and commentary. The ensuing conversation is likely the first time many people have learned that the Betsy Ross flag has been co-opted by modern-day extremist groups:
The long-term impact of the action remains to be seen. For now, the backlash underscores the reality that Nike is raising the stakes for what it means to be culturally relevant: by halting distribution of the Air Max 1 USA, Nike is connecting its actions to its ads.
Will Disney’s U.S. subscribers outnumber Netflix by 2024? That’s the question Danny Vena of The Motley Fool asked in an article after a Morgan Stanley analyst predicted that the combined subscribership of Disney’s streaming services could surpass Netflix’s own subscriber base within five years. Now here’s another question: how much do these numbers matter? After all, we don’t even know what kind of business Netflix will be in five years.
Netflix Is an Entertainment Company
As recently as 2012, Netflix was a streaming service. Today Netflix is an entertainment company, creating television programs and movies that have won Academy Awards, Grammys, and Golden Globes. Netflix has become a thriving haven for New Hollywood artists, such as Russian Doll’s co-creator Natasha Lyonne, or Roma’s director, writer, and co-producer Alfonso Cuarón, who seek to make unconventional and daring art that requires Netflix to take risks. And whereas vanguard rivals such as HBO changed the course of television, Netflix has changed how we watch TV by ushering in innovations such as on-demand binge watching.
Netflix Is Diving into Gaming
The increasingly popular narrative about Netflix is that the company that disrupted the entertainment world now risks being disrupted by new entrants such as Apple TV+ and Disney+, two streaming companies launching in 2019. Disney+ in particular will offer a formidable line-up of original programming, tapping into its extensive catalog of Marvel titles.
But while Apple and Disney leap into streaming, Netflix is already adapting its business model, an example being its expansion into gaming. Netflix recently announced that by 2020 it will offer a mobile game based on the hugely popular Netflix show Stranger Things. The company also said that a game, “The Dark Crystal: Age of Resistance Tactics,” will be launched as an adaptation of the Netflix movie The Dark Crystal: Age of Resistance (a prequel to Jim Henson’s 1982 movie, which should appeal to the coveted Millennial audience).
A push into gaming makes perfect sense for Netflix. The gaming market is expected to reach $180 billion by 2021, fueled by the growth of formats such as mobile gaming (which will grow to $106 billion by 2021). Netflix can offer well-known entertainment titles that lend themselves to games and an audience that is receptive to gaming. According to Karol Severin, lead gaming analyst for MIDiA Research, 46 percent of Netflix’s weekly active users play games on mobile devices and 33 percent play on consoles, “which over-indexes significantly compared to the consumer average.” In addition, gaming keeps Netflix’s audience locked into its own platform. After you’re done watching Stranger Things, you can play the Stranger Things game without leaving the Netflix universe. In addition, gaming creates the potential for revenue through features such as in-app purchases, a model that Fortnite has mastered. And Netflix needs more revenue.
Netflix is already showing us another way the company is incorporating gaming — by embedding a gaming experience into the content itself, as we’ve seen with choose-your-own-scenario interactive film Bandersnatch that Netflix aired in 2018, and the choose-your-own adventure experience Minecraft: Story Mode. These are not games, per se, but interactive content in which the viewer participates in the storylines. Watch for Netflix to create more sophisticated social experiences that merge plots with games, perhaps with augmented reality and virtual reality.
Three Ways Ways Netflix Is Evolving
Netflix is changing in other ways, too, such as:
Becoming a licensing and merchandising company. Speculation abounds that Netflix will offset mounting operational costs by incorporating ads. In fact, Netflix is already monetizing its shows. Stranger Things alone has created a strong base upon which to build a licensing and merchandising business. For example, Netflix and bike maker Mongoose have agreed to offer a limited edition Mongoose based on a fictional bicycle used in Stranger Things. As reported in License Global, “The collaboration includes an in-episode promotion that will see Maxine ‘Max’ Mayfield from the series riding the bike in the upcoming season of the show. Starting later this month fans of the series will also be able to get their hands on a replica of the bike used in the promotion.” And Mongoose is hardly the only company co-branding with Netflix — as evidenced by co-brands launched in 2019 between Stranger Things and Burger King, Coca-Cola, H&M, and Nike. These relationships — hybrid in-show product placements plus real-world merchandising — offers a glimpse of how Netflix will monetize its titles more broadly. In fact, Netflix has merchandised Stranger Things so extensively that Fast Company recently noted with derision that the show is turning into Sponsored Things.
Becoming a center for music exploration. Netflix is rapidly becoming a music brand. Homecoming: A Film by Beyoncé recently demonstrated how powerful and relevant Netflix can be as a platform for music distribution. Miley Cyrus understands this reality, as witnessed by her using Netflix as to drop new music linked to her appearance on Netflix’s Black Mirror. Meanwhile, the new Netflix movie Beats has gained street cred for its use of hip-hop, and Thom Yorke of Radiohead and Director P.T. Anderson recently made a music video for Netflix. Netflix is especially ideal for artists such as Beyoncé who are savvy about using multi-media to extend their audiences. Stay tuned.
I could also see Netflix monetizing customer data. Netflix is sitting on a trove of data about its customers’ viewing habits and demographics. It’s possible that Netflix will build a revenue stream from that data, as Amazon does. In addition to providing customer demographic data to third parties, Amazon also offers advertising services both on the platform and across the digital world by using data it has amassed on customers’ purchasing habits. Netflix has denied it will offer advertising on the platform itself. But Netflix could conceivably sell customer analytics services and even develop advertising products beyond Netflix.
Netflix Succeeds with Cultural Relevance
Meanwhile, Netflix continues to play to one of its strengths as a content creator: tapping into cultural trends, a case in point being the launch of Tidying up with Marie Kondo. The show not only mirrored culture but shaped it by prompting viewers to return their used clothing to vintage stores in droves. Shows such as Tidying up with Marie Kondo and Stranger Things remain important: they attract and keep audiences. But creating great content alone is not the future of Netflix.
Netflix Embraces Risk
Netflix’s ability to adapt is a reason why Netflix Vice President of Original Content Cindy Holland recently said of Disney and Hulu, “I don’t think there’s any one that stands out as the competitor. We’ve anticipated that all of these traditional players would enter into our space. The more successful we were at building an on-demand subscriber base with content, the more likely they were going to stop licensing to us. It’s actually one of the reasons why we started original content in the first place. We believed this shift would happen. It’s just taken many years longer than we thought. So we welcome it.”
Netflix succeeds by doing the things you don’t see coming. Doing so means taking risks. And perhaps the ability to take risks is really Netflix’s greatest asset. As Holland said, “We are not afraid to try a bunch of different things, some of which may work, some of which may not. It’s part of our culture to embrace mistakes and failure and learn something from it.”