How Netflix wants to get the next ‘Squid Game’

Netflix's latest earnings results show that its bet on global content production is paying off.

Squid Game promotional art

142 million Netflix subscribers watched "Squid Game" within the show's first four weeks.

Image: Netflix

Call it the "Squid Game" effect: Netflix posted better-than-expected earnings results Tuesday afternoon, adding nearly 4.4 million subscribers during Q3, and forecasting another 8.5 million additional members for the holiday quarter.

This comes after Netflix added just 1.5 million members in Q2, a quarter during which the company had lost 430,000 subscribers in North America. In Q3, Netflix not only reversed that trend by adding 70,000 North American subscribers, it also posted massive gains overseas. Most notably, Netflix added almost 2.2 million members in the APAC region — the biggest gain there since early 2020.

Some of the Q3 growth, and a good chunk of the Q4 forecast, may be attributable to "Squid Game," the South Korean horror drama that became Netflix's biggest global show to date soon after its launch in mid-September. Netflix told investors Tuesday that 142 million of its 214 million subscribers watched the show during its first four weeks on the service. "'Squid Game' is incredible," said Netflix founder and co-CEO Reed Hastings while donning a track suit similar to the ones worn by the show's characters.

"Squid Game" isn't Netflix's only global success story: The newest season of Spanish hit show "La Casa de Papel" was watched by 69 million subscribers, while British "Sex Education" attracted 55 million viewers. "Great stories truly can come from anywhere and be loved everywhere," executives wrote in their letter to investors, which also highlighted that the company is now producing originals in 45 countries.

"Stories can increasingly come from anywhere in the world," co-CEO Ted Sarandos said during the company's earnings call. "Storytellers ... from everywhere in the world will pave the way that TV and film is made in the future."

This week's earnings were overshadowed by discontent among Netflix employees over the company's handling of its latest Dave Chappelle comedy special, which has been criticized for including transphobic remarks. Trans employees and their allies have planned to stage a walk-out Wednesday to demand disclaimers for transphobic content as well as more investments in content produced by trans creators and the hiring of trans executives.

Executives didn't comment on the controversy at all during the call, but Sarandos had previously claimed that Chappelle's anti-trans jokes wouldn't translate to real-world harm — statements that were rejected by both current and former employees. (He later apologized.) Netflix further infuriated employees with the firing of one of the trans employees who had been vocal about the Chappelle special. The dismissal reportedly came after internal data about the special as well as "Squid Game" was leaked to the media.

Thanks to that leak, we now know that Netflix paid $24.1 million for Dave Chappelle's latest special — more than what the company spent on all nine episodes of "Squid Game," as Bloomberg's Screentime newsletter reported this weekend. Chappelle's previous Netflix comedy special has reportedly been viewed by 24 million accounts — dwarfed by the audience of global hits like "Squid Game" or "La Casa de Papel," and perhaps driving home the point that global shows are a key part of the company's future.

On Tuesday, Sarandos credited Netflix's technology and delivery infrastructure with turning these international shows into hits, but he also described the company's global content business as a kind of flywheel that benefits from each success story. "We can promise international creators the possibility of having a 'Squid Game' experience," he said.

NOTE: Protocol has been acquired by Axel Springer, whose chairman and chief executive officer, Mathias Döpfner, is on the board of Netflix.

Update: This post was updated Oct. 19 to include the fact that co-CEO Ted Sarandos later apologized for his statements.

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