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What does “Squid Game’s” success mean for Netflix?
Oct 19, 2021

What does “Squid Game’s” success mean for Netflix?

Netflix says the South Korean show became its most watched program less than a month into its debut.

Many people spent the pandemic binge watching TV shows and movies. And if the streaming wars were heating up before, now they are white hot.

Netflix had a head start, and pretty much owned the streaming space for almost a decade. Now it’s fighting to hold on to that position. And the competition is real: Disney+, HBO, Apple TV.

Will “Squid Game,” the breakout hit from South Korea, reassert Netflix as the leader in the streaming competition?

Julia Alexander is a senior strategy analyst for Parrot Analytics. The following is an edited transcript of our conversation.

Julia Alexander: What we are seeing with Netflix is they are losing a bit of demand. When we look, we’re basically looking at where’s the demand for consumers attention, and therefore their subscription dollars? And we’ve seen Disney+, and actually Apple TV+, and HBO Max really jump up over the last year. And Netflix has started to slow down. So I think what Netflix is really experiencing is, as these companies come up, and as they start to bring their licensed product back to their original market — so, if you think of NBCUniversal licensing stuff to Netflix, and now they have their own streaming service called Peacock, they might take their stuff back and put it back on Peacock — Netflix really has to rush to figure out, “How can we make content that people really want to stick around for and come back for and watch? And also, new hits that people are really excited to watch?”

Kimberly Adams: What does that mean for Netflix’s outlook in the long term?

Alexander: What Netflix figured out pretty early on is that to really be a global streaming service that succeeds in many, many countries, they have to be in those countries. They have to have a presence. They have to be working with local broadcasters and partnering with production companies. The reason that Netflix has something like “Squid Game,” which is their most watched show of all time, according to the company, the reason they have that is because they built a presence in South Korea since 2016. And so what we’re really seeing is all these companies trying to catch up to Netflix. They’re trying to have a presence in the United States first and foremost, and then moving on to Europe, Latin America and Asia.

Adams: I guess looking at “Squid Game,” does this say that Netflix’s strategy has been a success?

A participant dressed as one of the guards from Netflix’s “Squid Game” poses for an interactive event at the Korean Cultural Center in Abu Dhabi. As part of the event, guests could play some of the games featured in the hit show. (Courtesy Giuseppe Cacace/AFP)

Alexander: I think it’s pointing to everything that Netflix has tried to prove to investors is starting to pay off. Before this, they had shows like the “Casa de Papel,” which in the United States is called “Money Heist.” They had “Dark,” a great show out of Germany. Those all traveled pretty well to the United States. They found their audience. But nothing really captured people’s attention the way “Squid Game” did. What I think it speaks to is that looking at what’s working in one country, seeing how it travels and then using their homepage — Netflix’s homepage is the most important piece of real estate in Hollywood. Netflix can then go, “Why don’t we promote it to our top of the page and just roll the dice on it?”

Adams: And if I can ask you to sort of step away from the tech analyst side of things, does getting these types of shows that are actually produced in the countries where they’re set, by people from those countries, is it maybe changing the way that we see the world?

Alexander: It absolutely is. I think what happened was the internet came along and streaming services came along, and all of a sudden, content that may not have been accessible five years ago is extremely accessible and extremely discoverable. And so if we think about the basic sentence, “out of sight, out of mind,” what streaming has done and what these companies being in different countries and working with local creatives has done is put stuff in front of people’s mind and therefore brought it to attention.

Adams: You know, we’ve talked about the big players. What about these very niche streaming services like the Funimations and Crunchyrolls, which I’m asking about because I love anime?

Alexander: The niche streaming services are actually in a really interesting place, where because they have less overhead costs, because they’re smaller, they can commit to just being extremely attractive to a smaller subscriber base. What’s really fun about Funimation and Crunchyroll, specifically, is that as anime becomes much more in demand, which we’ve seen, those streaming services are seeing an influx of subscribers for people who are maybe getting their first taste of anime on Netflix, which has a very big anime selection, but they’re going to find new stuff. When we think of niche streaming services, there’s always going to be demand from certain groups, whether they want to watch live cycling, whether they want to watch anime, whether they want to watch live rowing, whatever it may be. Those used to be networks that were bundled into a massive cable package you kind of stumbled upon. And now those feel like a la carte additions to your big streaming services. So for example, if you’re me, you have your Netflix, your HBO Max, your Hulu, your Disney+, and then Crunchyroll. And those would have been part of a package that you would have added on to cable 15 years ago. And so I think what’s really fun for consumers now is that we get to go, “I’m spending, $35 a month on these four things.” You’re still spending less than cable and getting the general entertainment that you want.

Related links: More insight from Kimberly Adams

And sometimes that roll of the dice gives you a jackpot. According to leaked documents seen by Bloomberg, Netflix estimates “Squid Game,” which cost about $21 million to make, will generate almost $900 million in revenue.

Also in that Bloomberg report, which Netflix was none to happy to see go public, were some other interesting “Squid Game” numbers. Like the fact that about 132 million people have watched at least two minutes of the show, and about two-thirds of them have already finished watching the whole series.

Netflix is really digging in on its global strategy. EuroNews reports the company is planning a competition for filmmakers in sub-Saharan Africa to produce a new series of African folktales. The six winners will each receive the equivalent of almost $70,000 to make their short movies.

And back to those leaked documents Bloomberg saw, this interesting detail — “Squid Game” cost less to make than the recent, and very controversial, Dave Chappelle special, “The Closer.”

The Verge reports Netflix suspended, then reinstated a trans employee who tweeted complaints about the show, saying Chappelle’s jokes attack “the trans community, and the very validity of transness.”

Netflix says the employee, Terra Field, was not suspended for the tweets, but the trans employee resource group at the company is planning a walkout later this week in protest of the Netflix’s overall response.

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The team

Molly Wood Host
Michael Lipkin Senior Producer
Stephanie Hughes Producer
Daniel Shin Daniel Shin
Jesus Alvarado Assistant Producer

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