Netflix estimates its latest mega-hit, "Squid Game," will be worth nearly $ 900 million to the company, according to Bloomberg, underscoring the windfall that huge success can be generated in the streaming age.
Netflix differs from movie studios and television stations in that it does not generate sales based on specific titles, but instead attracts customers with its catalog and a constant rate of new releases each week. However, the company has a wealth of data on what its customers are watching and uses it to determine the value of individual programs.
"Squid Game" is notable for its popularity, as well as its relatively low cost. The South Korean show, about people in debt in a deadly contest for a cash prize, had an impact value of $ 891.1 million, a metric the company uses to measure the performance of individual programs. The show cost just $ 21.4 million to produce, about $ 2.4 million per episode. These numbers apply to season one only and are taken from a document detailing Netflix's performance metrics for the show.
The document underscores the success of that show for Netflix and provides the clearest picture yet of how the world's most popular online television network judges the success of its programming. Netflix has released select viewership figures for a handful of TV shows and movies, but doesn't share its more detailed metrics with the press, investors, or even the show's creators themselves. Guessing the popularity of a particular show has become a board game in Hollywood, even though Netflix has started posting dates on Dribs and Drabs.
An attorney representing Netflix said in a letter to Bloomberg that it would be inappropriate for Bloomberg to disclose confidential information in documents that Bloomberg reviewed. "Netflix does not analyze these metrics outside the company and is taking important steps to protect them from disclosure," said the attorney.
Some of the numbers are self explanatory and reflect data that Netflix and other services are already reporting. Approximately 132 million people watched at least two minutes of "Squid Game" in the show's first 23 days, breaking Netflix's record for "Bridgerton." The two-minute number is what Netflix releases to the public for some shows.
The company said 111 million people started the program earlier this month, but that was based on slightly older data.
While Netflix has announced the number of people who start a show, it has not yet disclosed how many people stayed to watch more of the show (stickiness) or how many people finished the series (completion rate). Linear TV channels report the average number of people who watch a show during its duration, which makes Netflix's two-minute numbers seem excessive in comparison.
In the case of Squid Game, Netflix estimates that 89% of the people who started the show watched at least 75 minutes (more than one episode) and 66% of the viewers or 87 million people finished the series in the first few 23 days. All in all, people spent more than 1.4 billion hours watching the show, which was produced by Siren Pictures.
Viewership figures should encourage investors who have found their enthusiasm for Netflix again after several turbulent months, also because "Squid Game" was so popular. The company reported its slowest subscription growth since 2013 in the first half of the year, blaming a lack of successful new shows for some of its woes. He also blamed the coronavirus for slowing down television and film production. The stock has been down for much of the year, lagging behind the market.
But the company's stock has risen nearly 7 percent since Squid Game was launched in September. 17 and valued the company at $ 278.1 billion. Even critical investors are expecting the company to increase its third-quarter performance or its fourth-quarter guidance, if not both.
"We believe Netflix has found a sound and profitable strategy in its efforts to internationalize content, a perfect example in 'Squid Game,'" Wedbush Securities analyst Michael Pachter wrote in an Oct. 14 statement. Pachter was Netflix's loudest skeptic among Wall Street analysts. "This, and Seinfeld's fourth-quarter launch, should provide a solid cushion."
Some of the metrics that Bloomberg sees are more idiosyncratic and it is impossible to tell from the document what data Netflix uses to calculate each formula. "Squid Game" scored 353 points on Adjusted View Share or AVS, reflecting not only how many people watched it, but also how valuable those viewers are. (An AVS greater than 9 or 10 is already considered high). Viewers who are new customers or who use Netflix less often are considered more valuable, as it suggests that these shows are one reason they weren't canceled.
AVS is the point where Netflix begins rating a show based on current and former employees.
What makes Squid Game even more valuable is its popularity relative to its low cost. The show cost less than a recent Dave Chappelle special or just a few episodes of "The Crown." Netflix measures this using a metric called efficiency, which measures audience (or AVS) versus cost. According to the document, the program is 41.7x efficient when 1x efficiency is considered robust. Chappelle's "Sticks & Stones" was 0.8X, Bloomberg reported this week.
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