Helped by the breakout hit “Squid Game,” Netflix on Tuesday boosted its quarterly profits and added more subscribers than expected.
The Korean series, where characters desperate for money enter a deadly competition, was viewed by 142 million households in its first four weeks — the largest series launch in Netflix history, the company said. The program ranked as first in 94 countries, including the U.S.
The show’s popularity helped Netflix add 4.38 million subscribers in the third quarter, up from 2.2 million a year ago. Analysts had expected the company would add 3.78 million paid subscribers in the quarter.
The streamer’s revenue rose 16% to $7.48 billion in the third quarter, compared to a year ago. Net income was $1.45 billion, up from $790 million a year ago, and easily surpassed analyst estimates.
The subscriber growth validates Netflix’s strategy to expand its investment in foreign language titles and local stories. Under the leadership of Bela Bajaria, who was promoted last year to head of global TV, the company has greenlit such titles as French series “Lupin” and German drama “Barbarians” that have resonated globally among its 214 million subscribers.
“Squid Game” was released on Sept. 17. Other popular titles in the quarter included season 5 of the crime drama “La Casa de Papel,” seen by 69 million households; and season 3 of comedy “Sex Education,” which was viewed by 55 million households in the first four weeks, Netflix said.
“‘Squid Game’ is representative of what we see is years of execution on a very well planned strategy,” said Michael Morris, a senior managing director at Guggenheim Partners.
Some foreign language shows can cost less than U.S. programs. For example, Squid Game cost Netflix $21.4 million, compared to $24.1 million Netflix had paid stand-up comic Dave Chappelle for his special, “The Closer,” according to Bloomberg. “The Closer”, which was released Oct. 5, was viewed by a much smaller audience pool of at least 10 million people, Bloomberg reported last week.
Netflix has received substantial backlash from controversial remarks Chappelle said in his special about trans people, which some believe could cause further violence toward the trans community. Some talent, including Australian comedian Hannah Gadsby, have criticized Netflix’s stance on the issue.
Netflix says it does not plan on taking the special down and does not believe it incites violence. Some have praised the company for standing by the creative vision of its talent, while other people have slammed the streamer for not standing with its concerned trans employees.
On Wednesday, trans employees and their supporters plan to do a walkout followed by a rally in Hollywood. Among the demands is putting a disclaimer in front of transphobic content.
Nonetheless, the controversy has not affected Wall Street’s outlook for the company, whose stock closed on Tuesday at $639, flat from Monday.
“The Closer” was 8th in Netflix’s top ten programs in the U.S. as of Monday.
“Netflix’s brand feels like it came out on top,” said Larry Adams, chief executive at LVA, a New York-based marketing agency. “The truth is standing behind your creators is the hallmark of a great partner.”
On Monday, Netflix co-CEO Reed Hastings declined to comment on the organizers’ demands when he was asked about it during a discussion on philanthropy at the Milken Institute Global Conference in Beverly Hills.
“I’ve always kept the two worlds separate,” Hastings said. “When I’m in philanthropy, I don’t talk about Netflix or try to promote Netflix or answer questions on Netflix.”
Although it faces growing competition from Disney and other rivals, Netflix enjoys a head start in foreign markets.
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The Los Gatos-based company recently announced price increases on subscriptions in New Zealand the Netherlands and other countries.
“The price increases are a sign of strength, as is the ability to create a hit like ‘Squid Game’ that can catch fire across the entire world,” said Berna Barshay, an analyst at Empire Financial Research.
Netflix has been investing heavily in growing its intellectual property, buying the Roald Dahl Story Co., which manages the rights of the late author’s works for a undisclosed price. It’s also rolling out mobile games for free to its members. Last month, Netflix bought Glendale-based game developer Night School Studio.
Analysts see gaming as a way for the company to attract more members of a household to spend time on Netflix.
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