(Bloomberg) – Netflix Wins Streaming ‘Squid Game’: T. Lachapelle TV fans have been willing to give all the new streaming TV services a shot. But “The Squid Game” shows how Netflix Inc. has uniquely mastered the art of keeping its subscribers.
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On Tuesday, Netflix beat expectations when it reported 4.38 million net new members for the third quarter; Much of the boost came from the Asia-Pacific region, while the United States and Canada grew again. But even those results don’t fully reflect the phenomenon of the past few weeks of “The Squid Game,” which perfectly demonstrates how Netflix has turned serendipity into a reliable business strategy. This is in contrast to the industry’s obsession – risk averse – with family franchises and trustworthy old titles.
In mid-September, just before the quarter ended, Netflix launched a Korean-language series with no globally recognizable actors and a violently dystopian plot that for years was rejected by studios because it seemed too grotesque. And yet the allure of a bizarre plot, mysterious title, and high degree of fear of missing out on the phenomenon have fueled curiosity for “The Squid Game” around the world, making the series the biggest phenomenon in the world. the history of Netflix.
In early October, Netflix mobile downloads soared. Apptopia estimates that the app was downloaded 777,000 times on October 4, the most so far this year. Since then, “The Squid Game” has been parodied on NBC’s “Saturday Night Live.” Mobile games that mimic the series have topped the iPhone download charts. And spooky costumes themed from the show are expected to abound this Halloween. “The Squid Game” even surpassed James Bond on its opening weekend in theaters. Due to the success of the show and a recovery after delays of other productions last year due to Covid-19, Netflix projects that subscriptions in the application will accelerate to 8.5 million in the fourth quarter.
According to well-guarded internal documents that Bloomberg News discovered this week, Netflix also estimates that “The Squid Game” has generated $ 891 million in “hit value.” It’s not entirely clear what that means: Netflix calculates something called Adjusted Viewing Share (AVS) based on the audience and the estimated value of those viewers; the AVS of a program’s duration becomes its impact value, Bloomberg reported.
That formula for calculating value without counting on box office sales figures, advertising revenue or any other traditional performance metrics signals how the industry might determine future financial success. It also shows how a series that might look like a day flower from the outside can actually be a major profit driver. For subscription services, the highest-yielding investments are productions that motivate a bored customer to re-interest rather than unsubscribe.
In an attempt to translate Netflix statistics into a language investors can understand, Matthew Harrigan, an analyst at Benchmark & Co., estimated that the company added about 7 million members thanks to “The Squid Game.” Those users, if they never cancel, translate to $ 4 billion worth of Netflix, he wrote in a report. That equates to 1% of Netflix’s market capitalization.
Netflix has been criticized for not having enough long-lasting franchises like Marvel and Star Wars. Having them would certainly help its efforts to expand into merchandise licensing, which is one of Walt Disney Co.’s highest-margin businesses, however, while those franchises may have helped Disney + achieve many subscribers up front, your narrow focus could also limit the final size of your subscriber base. Even for viewers who prefer a specific genre, the vast majority of their viewing time is spent on services with extensive menus, according to a recent Parks Associates survey.