Netflix's next chapter will feature this card game company

Netflix (NFLX) has struggled in recent months, prompting investors and company watchers to wonder what the streaming giant's future looks like.

That future, as it turns out, could be linked to "Exploding Kittens," a card game about "cats and destruction." Netflix and the card game-maker are collaborating on a TV show helmed by "King of the Hill" creators Mike Judge and Greg Daniels — and it's going to feature a multi-platform approach that's likely to be a key to Netflix content in the future.

“Imagine, now, you can play the game, then go watch the Netflix show,” said "Exploding Kittens" CEO and co-founder Elan Lee. “You fall in love with a character in the game called Tacocat, who’s great because he’s a palindrome. So, I go and buy the Tacocat plush toy and the tag says, 'Tear this tag and, next time you play 'Exploding Kittens', you go first no matter what.’”

Netflix, as a company and as a brand, is in the middle of a massive change. The streaming giant reported a first-quarter subscriber loss of 200,000 users in April, and on Tuesday, it reported a loss of 970,000 subscribers in the second quarter. Netflix has been especially roiled by inflationary pressures, growing competition, and an increase in subscriber churn. On Monday, Morgan Stanley (MS) even warned that a possible "streaming recession" was on the horizon.

So, where does that leave "Exploding Kittens"? On some level, in the eye of the storm. The "Exploding Kittens" streaming TV series is in a lot of ways a major win for Netflix — not only is it already visually interesting and successful, with characters built-in, but "Exploding Kittens" already has a devoted fan base. "Exploding Kittens" even got a shoutout from Netflix COO and Chief Product Officer Greg Peters in the company's last earnings call.

"There's an early glimmer of where we're trying to head with this with the announcement we just recently did with a launch of both a game and an animated series around the 'Exploding Kittens' IP," Peters told analysts in April. "That's an initial step on a long road map we have around thinking about how we make the film and series side and the interactive games experience, sort of the interplay between those, magnify the value that our members are getting from both. So, it's like one-plus-one-equals-three and then hopefully four, then five. That's the sort of multi-year vision that we've got behind it."

Netflix has other interactive TV shows, including "Minecraft: Story Mode" and "Black Mirror: Bandersnatch," but "Exploding Kittens" will mark a new phase in the company's development of that type of content.

Lee, whose resume includes being an early Xbox game designer, is excited for the interplay between the TV show and the game itself.

“The show will come out next year,” he said. “When the show comes out, the game will go through a huge change to accommodate all the new characters… You’re going to see characters that you already love come to life. You’re going to hear their voices for the first time ever.”

Try not to explode

Lee and his co-founders, Matthew Inman and Shane Small, first started raising money for "Exploding Kittens" through a Kickstarter in 2015. The three were hoping to crowdfund $10,000 to launch the game — instead, they ended up raising more than $8.7 million, and to this day are responsible for one of the most-funded Kickstarters ever.

The game works pretty simply: You and your friends draw cards, while trying not to draw the exploding kitten — whoever draws that exploding kitten loses. Though there's the possibility of getting the cards to defuse the kitten, odds are, you're going to have some competition. The game's also filled with off-kilter feline characters like Beard Cat, Tacocat, and Rainbow-Ralphing Cat. There's one goal, as the directions say — "try not to explode."

Since its launch, "Exploding Kittens" has grown in more ways than one. For one, the company's been making more games. One of the latest is Throw Throw Burrito, a dodgeball card game where you, you know, throw burritos at one another.

“We have this really nice formula where we make games that make people entertained and we know an audience will show up for that, so that’s what we keep doing," Lee told Yahoo Finance.

In 2019, the company even garnered $30 million investment from Peter Chernin’s TCG Capital, kicking off, among other things, a bidding war for the "Exploding Kittens" television series. It was the company's vision of a multi-platform entertainment ecosystem that attracted the "Exploding Kittens" team to Netflix, said Lee.

“We were in this crazy fortunate situation where everybody was approaching us,” he told Yahoo Finance. “For us, what pushed Netflix over the edge was this incredibly compelling argument where they said that we don’t want to just build a TV show. We want to build a brand, help fund the production of your video game… We’ll make the show as long as you agree to make the content, and characters can move around across properties.”

Akiko Fujita contributed to this report.

Allie Garfinkle is a senior tech reporter at Yahoo Finance. Find her on twitter @agarfinks.

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