• Netflix grants toymaker Jazwares license to develop a 'Stranger Things' toy collection

• Maker of popular Squishmallows plush toys plans line of figures, playsets and costumes

• Deal marks expansion of Netflix's merchandising business

(Reuters) - Netflix is expanding its presence in the toy business, striking its first master licensing deal with the company behind the popular Squishmallows plush toys to develop a product line inspired by its hit science-fiction series “Stranger Things.”

The streaming giant granted toymaker Jazwares the right to develop a "Stranger Things" collection - including figures, play sets, toy vehicles, costumes and stuffed toys - based on the series, which returns for its fifth and final season later this year. The licensing deal builds on Netflix's relationship with the toymaker, which last year introduced its first "Stranger Things"-themed Squishmallows.

"The Duffer Brothers have created such an incredibly rich world that's packed with '80s nostalgia and pop culture references and great characters," said Josh Simon, Netflix vice president of consumer products, referring to Matt and Ross Duffer who created the series. "From a merchandise standpoint, and a product-creation standpoint, we really want to deliver that same level of storytelling and attention to detail to the fans."

Netflix, which ignited the streaming video revolution that upended Hollywood, has adopted a time-honored entertainment industry strategy of selling consumer products and experiences based on its most popular series. Its first franchise hit, "Stranger Things," served as the model.

"Stranger Things" is set in the Midwestern town of Hawkins, Indiana, where a supernatural mystery lurks below the surface. Its nostalgic references to 1980s food, music and fashion launched it into the cultural zeitgeist, making it one of Netflix's most popular series. That led to a range of consumer products deals, such as Scoops Ahoy ice cream, Surfer Boy frozen pizza and retro footwear from Clarks.

The series also has inspired spinoffs including a series of books, an Olivier Award-winning stage play, “Stranger Things: The First Shadow,” which opens on Broadway in March, and an animated series in the works.

Netflix has applied its “Stranger Things” merchandising strategy to other entertainment franchises, including “Squid Game” and “Bridgerton.” At the Nuremberg Toy Fair on Jan. 23, it announced a partnership with the LEGO Group to develop new play sets based on “One Piece,” Netflix’s live-action adaptation of Eiichiro Oda’s manga series.

The company does not disclose how much money it makes from merchandise sales or the live experiences it creates based on its popular characters and stories, such as "Stranger Things: The Experience," which brought the story's "upside-down" world to New York City and Los Angeles.

"It really kind of strengthens the brands and strengthens the excitement about the things people are watching on Netflix and falling in love with," Netflix Co-CEO Ted Sarandos told investors in October 2023.

At Walt Disney, the entertainment company whose namesake founder made merchandising an integral part of its corporate strategy, consumer product sales accounted for 14% of the company’s operating income in its fiscal fourth quarter.

The popularity of "Stranger Things" is what attracted Jazwares, a Berkshire Hathaway BRKa.N-owned company that makes products inspired by other popular entertainment brands, including Pokemon, Hello Kitty and Star Wars.

"We're well aware of how big 'Stranger Things' is," said Gerhard Runken, executive vice president of brand and marketing at Jazwares. "Obviously, we're all in it to make sure we can mirror the success they've had in the show, through consumer products."