Hu Huiyin, special correspondent of the 21st Century Business Herald, reported that while "Squid Game" became popular around the world like a whirlwind, its producer, the US video streaming giant Netflix (Netflix), also made a lot of money.
On October 18, Netflix (NASDAQ: NFLX) estimated that the recently exploded new drama "Squid Game" will create nearly $900 million in value for it, based on internal data.
The considerable benefits stem from the enthusiastic pursuit of the audience. Recently, Netflix said that 111 million viewers around the world have watched "Squid Game" and also topped the "Today Ratings List" in 94 countries. Subsequently, Netflix's stock price also soared sharply. Since the launch of Squid Games on September 17, Netflix's stock price has risen by 7%, and its market value has also hit a record high in October for 20 years of listing, increasing by about $19.2 billion (120 billion yuan). So analysts also expect the show to boost Netflix's earnings in its third fiscal quarter.
"Squid Games will undoubtedly be Netflix's most popular non-English-language series and will most likely be the company's most successful series of all time." Encouraged by the soaring market value, Netflix co-CEO Ted Sarandos could not help but make bold remarks.
Netflix's joy is palpable, however, its pressure to compete in the streaming space has not diminished. Recently, according to the prediction released by research company Digital TV Research, The total number of Disney's streaming users will surpass Netflix in 2025 to become the world's largest streaming company.
On the other hand, Netflix, which rarely can monetize on IP, also wants to embark on the road of IP commercialization. In addition to selling peripherals on its own e-commerce platform Netflix Shop, Netflix has also partnered with Walmart to create a digital storefront to sell merchandise related to popular episodes. But even so, Netflix is still slightly inferior in peripheral sales. In the major domestic e-commerce platforms, small merchants have launched the candy, the same mask and sportswear used for passing the level in the play, and they are planning to get a piece of the PIE from "Squid Game".
Under the boom of "Squid Games", how long can Netflix lead in the streaming field? Will monetization through IP be a long-term business?
<h4>Netflix wins? </h4>
With unprecedented popularity, "Squid Game" has successfully "out of the circle". The greater significance is that "Squid Game" is also an excellent example of Netflix going to the international market.
According to some data, since its broadcast on September 17, the "Squid Game" episode has attracted 111 million views. That number far exceeded the achievements of previous ratings champion Bridgerton, which was watched by 82 million households in the 28 days since its release.
Along with this, Netflix's stock price soared. As of the close of trading on October 15, Netflix closed at $628.29 per share. It is reported that Netflix's stock price rose by 16% in the last quarter, far exceeding the 2% increase of the NASDAQ index, which is dominated by technology stocks, in the same period.
"Squid Game" is not Netflix's first big victory after laying out the Korean market.
In March 2020, Netflix launched the second season of "Korean House of Cards" "Kingdom", and the drama entered the top ten of the region as soon as it was launched. It can be said that the fires of "Kingdom" and "Squid Games" undoubtedly prove that Netflix and "Hallyu" are in tune. But in fact, Netflix's success in the Korean market is not achieved overnight, but after many trial and error, it is the result of learning from experience.
Since entering South Korea in 2016, Netflix has adopted a "local original work" creative model, that is, Netflix-led and invested works, creating content through local materials and according to the preferences of local audiences, while the content is produced by local production teams. At the beginning, due to the failure to understand the audience's preferences, Netflix's self-made Korean dramas also suffered Waterloo. With the improvement of the "local original works" model, Netflix has also begun to taste the "sweetness" in content, and even created a hit such as "Squid Game".
Taking original local content as a "going to sea" strategy, Netflix will undoubtedly have to endure great challenges. In March, Kim Min-young, head of Netflix's korean and Asian content, revealed that since entering South Korea, Netflix has invested a total of 770 billion won in Korean content resources, and plans to invest $500 million to produce Korean content this year alone. Similar to the situation in South Korea, when Netflix entered Japan, it focused on more "local" anime. It has accumulated differentiated anime content that is different from Disney's family style through original Japanese animation and manga live-action series.
All of what Netflix has done shows its determination to enter the Asia-Pacific market. For Netflix, the importance of the Asia-Pacific market is self-evident.
According to Netflix's second-quarter earnings report, Netflix's streaming services revenue from the U.S. and Canadian markets in the second quarter was $3.235 billion, an increase of $395 million year-on-year, while revenue from the Asia-Pacific region was $799 million, an increase of $230 million year-on-year.
Although the North American region is still the main force contributing revenue to Netflix, if you look at the new paid users, the Asia-Pacific region is a new market that it cannot ignore. The data shows that Netflix added -430,000 new paying subscribers in the U.S. and Canada in the second quarter, compared with 1.02 million in the Asia-Pacific region. Even if the North American market revenue is considerable, it is undeniable that Netflix's paid user growth in North America has hit the "ceiling".
"Netflix must take the international route," Internet analyst Ge Jia told the 21st Century Business Herald reporter, in the past, because the American culture was relatively strong, Netflix could easily carry out one-way export of culture, "but nowadays, the status of American culture has been shaken, and people have begun to have aesthetic fatigue for heroic legends and inspirational stories." He further said that there is no doubt that Netflix will take the first step in internationalization in the Asia-Pacific region. Whether it is consumption capacity or willingness to spend, the Asia-Pacific region is the most suitable market after European and American countries. ”
Netflix's choice to "bet" on the international market comes largely from the pressure of its opponents.
Before September 2020, Disney+ will only be available in Europe, the United States and developed countries in Asia. In order to tap more potential users, since mid-September, Disney+ has been open to Southeast Asia, Latin America and African countries. In May, Disney also said it plans to close 100 international TV channels this year to move toward a future centered on streaming services like Disney+. That means its content is moving further toward streaming platforms like Disney+. According to Disney's financial report, during the third quarter of fiscal 2021, the number of Disney+ global paying users increased by more than 12 million, reaching a total of 116 million.
It is understood that as of June 2021, Disney's streaming media platform Hulu and Disney+ have a total market share of 19%, and the momentum is very strong.
Even so, Ge Jia still believes that compared with streaming media such as Disney+, Netflix still has obvious advantages. "Netflix, which started as a DVD rental, has already established a paid membership system, and 'seed users' have a high degree of acceptance of subscriptions. At present, we have not seen any other platform do a model like Netflix, that is, export copyright, and maintain such efficient sales. Ge Jia pointed out to the 21st Century Business Herald reporter that if it comes to copyright, Disney+ does have the upper hand, and its multi-platform distribution ability is relatively strong, but in terms of single platform, whether it is distribution efficiency or profitability, Netflix's status is still unshakable.
<h4>Borrow an IP to get a piece of the pie? </h4>
After the explosion of "Squid Game", Netflix also began to dig the IP of this series and "monetize" by selling peripherals.
On Netflix's e-commerce platform Netflix.shop, the reporter noticed that a number of T-shirts related to "Squid Game" were on sale, each price ranging from $34.95 to $49.95. In addition to selling peripherals on the e-commerce platform, Netflix is also planning to sell goods offline.
On October 11, Netflix announced that it would partner with Walmart to create a digital storefront on the retailer's website to sell merchandise related to hit episodes like Squid Games and Stranger Things. It is understood that the Walmart website will open up a special area for Netflix's merchandise Netflix Hub. This is also the first time that Netflix has established such an online storefront partnership with a very large retailer.
It is not difficult to see that the new revenue that Netflix seeks outside the core subscription business comes from the IP industry. The reason why Netflix has set its sights on IP is largely because its opponents have done a good job in IP monetization. It is understood that in 2020, Disney's retail sales of licensed goods will reach $54 billion. In addition, according to TitleMax's 2019 data, 8 of the world's 20 most profitable IPs come from Disney, with a cumulative economic value of $355.182 billion. On the other hand, Netflix can rarely dig out familiar IP.
This time, can Netflix use the popularity of "Squid Game" to create its own long-term IP?
Columbia Business School's Director of Retail Research, Mark M. Mark A Cohen is skeptical: "Most of them [Netflix's hits] have a short shelf life, unlike Disney's IP, which is a long journey for a generation." ”
Ge Jia also expressed a similar view to the 21st Century Business Herald reporter, "Disney is a copyright company, and its roles are all produced after decades of historical accumulation. He compares Disney's IP to "salt" and "sugar", but Netflix's IP is more of a pop culture, like a "delicious drink", which he thinks is difficult to develop. "Netflix can only increase some income at best. Unless Netflix can make the IP into a drama array, this is not something that can be done in a moment or three. ”
Although Netflix's follow-up in IP mining is weak, other unofficial e-commerce platforms can successfully share a piece of the pie. On Taobao and Amazon, IP products related to Squid Games, such as candy, sportswear and face shields, are readily available.
In the case of lime candy, for example, in the highest selling Taobao store, the sales of this item can reach 10,000 copies per month. As can be seen from product reviews, many consumers are trying to experience a "Squid Game", but many of them question the quality of the product. The reporter noted that in addition to the hot online sales, there are cake bakeries that attract traffic through the "Lime Challenge".
In Guangzhou, a cake shop called Mikajia Concept Baking took the lead in providing offline "Sugar Challenge" game services. Mika, the person in charge, told reporters that recently every day will hold a daily experience activity, and there is a secret room in the city to order one or two hundred carambosses to them at a time. However, some bakery industry insiders told reporters that they are not too optimistic about the online sales of such products, "People will actually pay more attention to interaction when playing the game of 'Sugar Challenge', and it is not too easy to rely on online sales alone, not to mention that the popularity of episodes may soon decline."
In addition to lime candy, the sales of face shields in the play are also hot. Chen Yi, the head of an online store called "Yiwu Huiyu Simulation Crafts", has been busy packing masks for shipment most of the time recently. The mask he sells is the same as in "Squid Game", and from the monthly sales point of view, the current sales of spelling orders have reached more than 100,000 pieces.
"Our masks are all purchased from the Yiwu factory, and the monthly sales of each product can be at least a few thousand." Chen Yi told reporters that he now has to analyze the flow every day to control the inventory. Based on this estimate, relying on this single product alone, Chen Yi can create hundreds of thousands of flowing water for his store every month. Although the mask is a blockbuster, Chen Yi has recently clearly felt that the turnover of the e-commerce platform is declining every day. "The popularity of popular dramas in China is generally only about a month. Especially now that there are more monks and less porridge, sales are even less guaranteed. He added to the 21st Century Business Herald reporter.
During the conversation, Chen Yi said that he was likely not to sell face shields after the popularity of the series decreased. "The extension of the sales time is mainly because of the Halloween in foreign countries, and there are more transactions on cross-border e-commerce platforms." He admitted that he originally wanted to sell sportswear with heat, but he did not do so in the end, "mainly worried that the quality of the supplier's goods is not up to standard, and the printed return rate is high." As soon as the TV series was on fire, many people took the opportunity to 'cut leeks'. ”
As the popularity of the series decreases, the business opportunity to make money from IP is likely to be fleeting. Perhaps it will take Netflix to dig out a more stable IP, and the "gold diggers" including Netflix can have a long-term business.
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