In 2021, Netflix shared that the famous series Squid Game generated an impact value of $891 million for the company.
And since Netflix doesn’t generate sales based on specific titles, how the company arrived at this figure is a bit of a mystery for everyone.
In the case of a movie studio, revenue/profit calculation from a title is pretty straightforward—Box-office collections + movie rights sold to a TV channel.
Even for a TV channel, the revenue/profit from a program can be easily calculated by determining the advertising revenue.
On the other hand, Netflix uses some “private” metrics to determine the value derived from individual programs.
An attorney representing Netflix once said: “Netflix does not discuss these metrics outside the company and takes significant steps to protect them from disclosure.”
While the figure of $891 million is impossible to determine for anyone outside Netflix, some variables likely contribute to this number.
To begin with, Netflix classifies its consumers into three categories: Starters, Watchers, and Completers.
Starters are “households that watch two minutes of a film or one episode” in a series in the first 35 days of release (data is checked for seven days and then another 28 days).
Completers are “households that watch 90 per cent of a film or season of a series.”
Households that watch 70 per cent of a movie or one episode in a series are considered “watchers.”
And the “watchers” data is what Netflix refers to when it says “142 Million Households Watched ‘Squid Game’”.
And when it comes to renewing a contract for a movie/series with the producers, Netflix uses numbers from this classification to make a decision.
The show is considered worth renewing if the “cost to watcher/completer ratio” is healthy.
Higher watcher/completer numbers mean that series/movies also have the potential to get new subscriptions or to retain subscribers at risk of cancelling their memberships.
