Global 'Squid Game' mania lifts Netflix quarter

South Korean drama 'Squid Game' debuted on Sept 17 and surprised Netflix executives by becoming the streaming service's most-watched original series in its first month. - Bloomberg

SEOUL (Reuters): Netflix Inc's global sensation 'Squid Game' helped lure more new customers than expected, the world's largest streaming service said on Tuesday (Oct 19) as it predicted a packed lineup would further boost signups through the end of the year.

After a sharp slowdown in the first half of 2021, Netflix added 4.38 million subscribers from July through September to reach 213.6 million worldwide. Wall Street analysts had projected 3.86 million additions, according to Refinitiv data.

Netflix enjoyed a subscriber boom last year as Covid-19 kept audiences at home, but growth stalled early this year. At the same time, Walt Disney Co's Disney+, AT&T Inc's HBO Max and other competitors bolstered their offerings. Netflix blamed the earlier weakness in part on a thin slate of new programming caused by production shutdowns from the pandemic.

Then, South Korean drama "Squid Game" debuted on Sept 17 and surprised executives by becoming the streaming service's most-watched original series in its first month. On Tuesday, Netflix said a "mind-boggling" 142 million households had watched the dark drama about people who compete in a deadly competition to erase financial debt.

The series, made with a relatively small budget, shot to the top of Netflix viewing charts in 94 countries, kick-started sales of track suits and Vans sneakers, and kindled interest in learning Korean. "Squid Game" merchandise is now on its way to retailers, Netflix said.

The fervour around "Squid Game" also is expected to lift the current quarter. Netflix projected it will pick up 8.5 million new customers by year's end, ahead of industry forecasts of 8.33 million, as it releases a heavy lineup of new programming. Upcoming debuts include big-budget action flick "Red Notice" and a second season of fantasy drama "The Witcher."

It also expects a "more normalised" programming slate in 2022 spread throughout the year, "assuming no new Covid waves or unforeseen events," the company said in a quarterly letter to shareholders.

Shares of Netflix were close to even in after-hours trading at $641 following the earnings report.

Most new customer pickups in the quarter came from the Asia Pacific market, where Netflix now has 30 million subscribers. Industry experts believe the region may rival the United States and Canada - Netflix's largest market - in three to five years, said Third Bridge senior analyst Joe McCormack.

Netflix is trying new ways to attract customers overseas, including offering a free plan in Kenya. It will take one to two years to tell if that tactic leads to more paying subscribers, the company said.

For the quarter that ended in September, diluted earnings-per-share came in at $3.19, beating analyst expectations of US$2.57. Revenue rose 16% to $7.5 billion.

Before the earnings report, Netflix shares had risen roughly 22% this year and were trading near record highs, but their gains lag behind the 54% increase in the Nasdaq.

Netflix, which keeps much of its viewership data secret, also said it will release information more frequently and shift its main publicly reported metric to hours viewed, rather than the number of accounts that watched a title for at least 2 minutes.

The company noted that it competes with a large set of activities beyond TV including TikTok and Fortnite. When Facebook Inc suffered a global outage in early October, "our engagement saw a 14% increase during this time period," Netflix said.

Executives did not address worker complaints about a Dave Chappelle comedy special, which the company has previously defended. Some employees say Chappelle made comments that were harmful to transgender people, and they plan a walkout on Wednesday.