Will 'Squid Game' Help Netflix Exceed Q3 Expectations?

Will the huge success of the South Korean survival drama series “Squid Game” produce another quarter of higher-than-projected global subscriber growth for Netflix? 

The giant streaming service is set to report third-quarter results on Oct. 19.

“Squid Game” launched Sept. 17, which means it will have been available for just two weeks before the close of Q3. 

But Netflix this week confirmed that it is already its biggest series ever. It's been viewed by more than 111 million accounts globally.

And according to streaming statistics tracking site FlixPatrol, topped the rankings of Netflix TV shows in 69 countries -- including the U.S. -- as of Oct. 14.

(*Nielsen's just-released data for the week of Sept. 13-19, which include data from just the first three days of the show's run, may indicate that it took a while to catch on in the U.S.: With 206 million viewing minutes in those first three days, it didn't make Nielsen's top 10 for that week.)  

Netflix’s “strong second half content slate — highlighted by “Squid Game” — has reinvigorated the stock and near-term subscriber optimism,” Daniel Salmon, internet and media analyst at BMO Capital Markets, wrote in a note to investors on Wednesday. 

Still, BMO is maintaining its subscriber estimates for Q3 and lowering its estimates for Q4. 

Salmon projects that Netflix will add just over 3.5 million total subscribers in Q3 — which would meet Netflix’s own projection —and add just over 9 million in Q4, versus analysts’ consensus projections of 3.82 million and 10.21 million, respectively, for those periods. 

Those projections include North American additions of 139,000 in Q3 — also lower than the 288,000 consensus — to reach 74.1 million total in the region, and 793,000 in Q4, to reach 74.88 million total. 

Netflix missed its projection of 6-million new subscriptions globally in Q1, netting just 4 million—but added 1.5 million in Q2, overdelivering on its modest 1 million projection. 

But all of the Q2 growth came from international markets, as its North American subscribers declined by 400,000.

But even prior to “Squid Game,” Netflix’s 3.5-million growth projection for Q3 was considered conservative by some analysts, as reflected in consensus estimates. Netflix’s projections since the Q1 miss seem designed to avoid more over-promising. 

Netflix attributed the Q1 miss to “short-term choppiness” in trends due to the ongoing disruption of COVID. While 2020 was a boom year for Netflix and other streamers due to pandemic shutdowns, and Netflix went to less-affected locales to continue some production, all studios’ content production was impeded. 

Still, Netflix co-CEO Ted Sarandos has said that the company’s production is fully up to speed, and Kagan recently projected that Netflix will spend $13.6 billion on production this year on an amortized basis — up 26% versus 2020’s $10.8 billion on the same basis. 

On a cash basis, Kagan put 2020’s spend at $12.54 billion. Netflix told analysts it planned to spend $17 billion on a cash basis in 2021.

*Nielsen's data was released after this article's initial posting, and was subsequently incorporated.

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