The Netflix Game

A few takeaways from the success of Squid Game and what it means for Netflix

Hi friends,

If you’re like most of the people I know, you probably binged Squid Game on Netflix at some point last week or had a friend mention it to you. The Korean thriller series has taken the world by storm and is well on its way to become Netflix’s most popular series ever.

Below are some thoughts on its success and what it tells us about Netflix.

1. Distribution is King

The success of Squid Game highlights the ability of Netflix to take relatively low budget series and turn it into a global phenomenon and give it a large viewership.

While we have limited viewership data so far on Squid Game, we know that Netflix believes it will be their most popular series ever. That title is currently held by Bridgerton, which was watched by 82M households!

Netflix has over 200M subscribers, and through its “Popular/Top 10 in the US” and "Trending Now units as well as personalization algorithms, is able to amplify content which has shown signs that it is working and deliver it to many more people.

Yes, the content still has to be good, but their ability to turn a low budget, foreign language series with relatively unknown talent (to most people at least) into a huge success watched by >80M households highlights the incredible nature of the distribution engine they have built up.

And this isn’t the first time either: Take the case of the TV series “You”. Only ~0.8M people watched it on Lifetime in 2018 while over 40M people streamed it in its first month alone after it made it on Netflix and went “viral”.

2/ The memefication of media

At least on the surface, it seems that TV series and other forms of media are increasingly transcending formats and mediums and becoming a key part of culture.

This is happening in a few ways:

  • memes and gags on social media which contribute to the virality of the content

  • representation in other digital formats or in the physical world

  • spillover into behaviors of people

In some ways, media that has meme potential is almost more likely to go viral because it can tap into the organic channels that are social media and the physical world (including word of mouth)

And Squid Game is a great example of it. Here are just a few examples of how the show is blowing up:

  • Representation in the “Metaverse”: Developers have recreated games from the show such as Red Light, Green Light in Roblox

  • Later this month, I bet we’ll also see that Squid Game will be one of the most popular themes for Halloween Outfits

As another example, people might recall the success of Queen’s Gambit sparked an increase in the sales of Chess Sets and the registrations and engagement on

Similarly, Netflix had this statement on its Q1 earnings call about how it shows can drive book sales:

Lupin, our French language series about a daring gentleman burglar played by Omar Sy, was not only our most popular new title this quarter on Netflix (76m member households chose to watch in the first 28 days), but it also propelled book sales of the novel in France; Lupin: Part 2 will debut later in Q2’21. Similarly, driven by the late December launch of season one of Bridgerton, Julia Quinn’s books hit The New York Times bestseller list for the first time in 18 years

3/ IP and the adjacencies to content

For a while, there has been a question around what if anything Netflix’s “second act” will be.

While they’ve dabbled in eCommerce and shopping a bit, Games seems to be a big area of focus in terms of expansion going forward.

Squid Game is a good example of how Netflix can leverage the content and IP it is creating in adjacent areas.

On the eCommerce side, while not a big focus, Netflix launched an eCommerce Shop recently where they sell merchandise from their shows. Unsurprisingly, Squid Game merchandise is already available and heavily featured, though if I were them, I would make essentially costume type outfits from the show available in the Shop as well.

On the Games Side, we know Netflix has been hiring key executives and talent for this initiative.

Gregory Peters, their CPO, speaking about their ambitions in gaming:

So this is going to be -- it's a multiyear effort. We're going to start relatively small. We'll learn. We'll grow. We'll refocus our investment based on what we see as working, and we'll just continuously improve based on what our members are telling us is working. But I'm really excited about a bunch of different ways that I think that we can provide an offering here that is differentiated from what's out there already. And the first of those is really about the IP that we create. We are in the business of making these amazing worlds and great storylines and incredible characters. And we know the fans of those stories want to go deeper. They want to engage further.

He also talked about Gaming as an extension of media and the interplay between them:

So we're going to try a bunch of different games through a variety of different mechanisms to see what's really working for our members. Part of that will be games that extend our IP. We think that's a really rich, rich space, so that's very much part of our long-term thesis. But also, we'll do things where we try stand-alone games. We feel like, ultimately, this -- the success of this initiative is about great games fundamentally, and those can come from a variety of different sources. Maybe someday, we'll see a game that spawns a film or a series. That would be an amazing place to get to and really see the rich interplay between these sort of different forms of entertainment.

Squid Game seems like a great example of what he is talking about. Netflix has the opportunity to create relatively casual games on mobile which drive more engagement with the series, and allow users to get more immersed and involved. As mentioned above, we’ve already seen it happening with the various Roblox Games and interactive mini-games on TikTok created based on Squid Game.

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4/ Niche at Scale

Netflix’s incredible scale of over 210M subscribers in over 190 countries means that it spends over $15B a year on content. With such a large content budget, and given their ambitions of continuing to acquire users all over the globe, they are able to spend a lot of money creating quite niche content.

More generally, Ted Sarandos, in a podcast with a16z in 2018, said that Netflix believes there are roughly 600 meaningful user “taste” segments. A given user tends to be in a dozen or so segments.

Using the data they have, they can tell exactly what segments they are weak in in terms of what segments have high churn/low gross subscriber adds relative to their size, and create extremely targeted content for them.

For even the most niche pieces of content, there are enough subscribers (>500K most likely) and potential new subscribers to make it worthwhile.

Most of the time, people not interested in a given niche don’t hear about the content targeted to that niche just given the vast library on Netflix. But occasionally, even these niche pieces of content go viral and reach many more people than Netflix might have imagined.

For the shows that show signs of taking off, Netflix can put its algorithms and marketing dollars behind as well as future content budget into it, to ensure it becomes a phenomenon which sustains for multiple seasons, even if the initial hope was a niche series aimed at acquiring and retaining “Spanish-speaking Viewers interested in Crime” for example.

5/ Local Content for the Globe

Very closely tied to the niche at scale point, is Netflix’s ability to both create a large amount of local specific content and reach large number of people around the globe with it.

Netflix has mastered the art of creating content targeted for local audiences, and figuring out the ones that have global appeal and making it available to that audience. A key element of this approach is providing subtitles and dubbing content in over 30 languages, to make it friendly to users across the globe. But the other part is to use their algorithms and their home screen to direct people to foreign language content that might be interesting to them which they might not otherwise consider.

As an example, Netflix has 5M subscribers in Japan. In 2021, they have been doubling down on Anime content and plan to release 40 new titles (compared to 20 in 2020). Yes, the anime is primarily targeted to Japanese audiences. But half of Netflix's 200 million global subscribers watched at least one Anime title in 2020.

Similarly, Netflix is pouring $500M into Korean language content, with just 4M users in Korea. But that’s not the only audience the content caters to of course, with US viewership of K-dramas up 200% between 2019 and 2021.

Squid Game is of course another great example of a local series which becomes a global hit, but it isn’t the first and it won’t be the last. Some others include:

  • Lupin from France (76m chose to watch in its first four weeks)

  • Money Heist from Spain (65m)

  • Who Killed Sara? from Mexico (55m)

  • Below Zero from Spain (47m)

  • Squared Love from Poland (31m)

  • Space Sweepers from Korea (26m)

Since 2019, non-English-language viewing in the U.S. has grown by 71%, and 97% of Netflix’s US members have chosen to watch at least one non-English-language title in the past year, a testament to the fact that Netflix’s approach is working.

Netflix touched on this in their earnings call as well:

Another goal is to create great, locally authentic stories in countries all around the world. It’s why our priority for local language titles is to have a big impact in the home territory so we don’t sacrifice local impact for “travelability.” But we’re increasingly seeing that these local titles find significant audiences around the world, which supports our thesis that great stories are universal: they can come from anywhere and be loved everywhere.

Even Jeff Bezos was full of praise for them for their approach.

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