Hi there! My name is Janko Roettgers, and this is Lowpass. This week: A proposal for Netflix’s location-based business, and new data on sports streaming.

Why Netflix should buy Sandbox VR

This week, Netflix shared a few more details about its budding location business: The company will open its very first Netflix House in Philadelphia on November 11th, with a second location set to open in Dallas on December 11th. Both locations will span across 100,000 square feet, and offer ticketed experiences related to Netflix franchises like Stranger Things and Squid Game, restaurants serving up Bridgerton snacks, merch stores, and more.

Netflix’s take on location-based entertainment is intriguing because it’s very different from the way Hollywood used to do this business. Instead of investing billions of dollars into massive theme parks that most people can only afford to visit once or twice in their life, Netflix embraces a model that costs both the company and its customers a lot less. 

Visiting a Netflix House will be free, with the company betting that consumers will open their wallets for games and other ticketed experiences. Netflix is also opening its locations in existing malls, which brings down the costs for the company, and hints at a future in which a Netflix House could eventually be in every major city.

The emphasis is on eventually here, because opening a 100,000-square-foot entertainment center still takes a lot of time and effort. Netflix has been talking about its Netflix House plans since 2023; this week, it shared that a third planned location in Las Vegas won’t be ready until 2027. There is, however, a way that Netflix could significantly accelerate its location-based entertainment plans — and it’s an answer that has been right in front of the company’s nose for some time: Sandbox VR.

Sandbox VR is a location-based entertainment startup operating over 60 locations worldwide. The company first partnered with Netflix in 2023, when it launched the Squid Game Virtuals VR experience. Earlier this year, Sandbox added an experience for Zack Snyder’s Rebel Moon Netflix franchise to its catalog. The two companies are also working on a Stranger Things experience that is scheduled to launch later this year.

Consumers who visit a Sandbox VR location are outfitted with a customized VR headset, a haptics vest and a set of trackers for full-body tracking. Then, they’re led onto a stage — a big, empty space equipped with tracking cameras, fans, and more — and immersed into the world of their favorite Netflix title, which they get to experience with their friends.

I got to try the Zack Snyder experience earlier this year. Once I had the headset on, I found myself in the middle of one firefight after another, often forced to kneel and duck behind crates and other objects that only existed in the VR world. The whole experience was only loosely based on the plot of the movies, and light on story overall, but chock-full of action. At the end of it, I was drenched in sweat, and my muscles ached for days.

Never watched Rebel Moon? No worries: Here’s a trailer for a peek at the Squid Game experience:

Sandbox also has some titles that aren’t related to Netflix. These include its own long-running Deadwood zombie franchise, which recently surpassed $100 million in ticket sales, according to Sandbox CEO Steven Zhao. But Netflix clearly does like Sandbox, and is going to incorporate the startup’s VR games into its own Netflix House locations.

Sandbox isn’t the first company to try its hand at ticketed VR experiences in partnership with Hollywood. The Void teamed up with Disney on a number of experiences; Dreamscape Immersive was backed by Warner Media and AMC Entertainment; Spaces was spun out of DreamWorks. All three companies have since closed their VR centers: Dreamscape pivoted to educational tech, Spaces got acquired by Apple, and The Void went bankrupt.

Sandbox VR almost didn’t make it through the covid-19 pandemic either, but has since emerged with a winning formula: Instead of investing in expensive custom props for every single experience, Sandbox uses open stages, which allows it to switch between experiences more easily. The company has also perfected its word-of-mouth marketing strategy: Visitors are being recorded on video, and get some clips of themselves shooting enemies after every visit to share with family and friends.

“It’s almost like a sneak peek,” Zhao told me during a conversation on the sidelines of the Game Developers Conference earlier this year. “You don’t get to see the full game, but you get to see snippets of it.”

And finally, Sandbox has been optimizing its operating costs by switching to a franchise model. Growth has since accelerated significantly, with plans to launch 30 locations in 2025 alone, and 127 future outposts in development.

Netflix could continue to participate in this journey as a content partner. Experiences like Squid Game VR keep a show top of mind with its fans while they wait for the next season to drop, while also helping the streamer to make some extra money. “It's not purely just marketing for them, but they generate substantial royalties from us,” Zhao told me in reference to studios partnering with his company.

Or, Netflix could just buy Sandbox outright, and instantly have a foothold in dozens of malls and downtown shopping districts worldwide. Sandbox locations could double as Netflix merch stores, host pop-up events whenever a new season of a popular show drops, and serve as a testing ground for new Netflix IP. (A Deadwood show, perhaps?) They could even become a part of the company’s video games strategy, and promote Netflix’s efforts to become the Netflix of gaming.

Plus, adding 60-some-and-counting Sandbox locations would further support Netflix’s bottom-up approach to location-based entertainment. Sandbox announced earlier this year that it surpassed $200 million in lifetime ticket sales. That’s not exactly Disneyland money — Disney’s cruises and theme parks generated $9 billion in revenue in the most recent quarter. But with Netflix’s marketing muscle, Sandbox could turn into a significant revenue generator for the streamer as well, all while further strengthening Netflix’s franchises.

Now, the necessary caveat: This is all pure speculation on my part. I have no inside knowledge to suggest that Netflix has any interest in acquiring Sandbox or that Sandbox is looking for a buyer. The streamer has also been very conservative about acquisitions in the past. Still, the team-up seems like a near-perfect fit.

Just consider how Netflix co-CEO Ted Sarandos talked about the company’s Netflix House locations in 2023: “It really strengthens the brands and strengthens the excitement about the things people are watching on Netflix and falling in love with. It gives them a place to go and express it. It's not a material investment relative to the [...] business that we're in. But it's a great way of building our consumer products business.”

Sounds like he could say the very same thing about Sandbox VR, doesn’t it?

People love to stream sports, as long as it’s free

Paid sports streaming is here, courtesy of Fox One and ESPN, Disney’s new sports streaming service. Both services launched this month, ahead of next week’s start of the NFL season. The big question: Are consumers willing to pay for sports streaming?

New data from streaming technology provider Amagi paints a murky picture, suggesting that people love to watch sports online – as long as it’s free.

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