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Netflix Will Report Total Hours Watched as New Ratings Metric — Q3 Earnings Report

Netflix touted major "Squid Game" viewership statistics, elaborated on its video game plans, and otherwise impressed Wall Street on Tuesday.

Squid Game

“Squid Game”


Netflix posted positive results in its Q3 2021 earnings report on Tuesday, including strong subscriber growth that outpaced analyst expectations.

The company reported 4.4 million global paid net subscriber additions, handily beating estimates of 3.84 million, per StreetAccount data obtained by CNBC. The company’s revenue of $7.48 billion met expectations, while its earnings per share of $3.19 exceeded analyst expectations of $2.56. The strong numbers served as a reversal of fortune for Netflix, which posted mediocre results in its Q1 and Q2 earnings. Netflix stock was largely unchanged at press time but has been trending consistently upward since August.

Much of Netflix’s Q3 subscriber growth hailed from Asia-Pacific (APAC) countries: 2.2 million of the paid net subscriber additions (half of the total paid net additions) were from the APAC region, while 1.8 million additions hailed from Europe, the Middle East, and Africa. The company noted that its subscriber growth in the United States was slower than in other regions. Netflix said it had reached a total of 214 million global subscribers.

Netflix’s strong growth in non-American markets helps to explain why the company has consistently touted its international programming in its earnings reports over the last few years. The company noted that the Spanish-language “La Casa de Papel” (aka “Money Heist”) was its biggest returning show of the quarter, with 69 million views from member households. Chief among Netflix’s non-American language successes is “Squid Game,” a Korean-language drama that premiered September 17. Netflix championed the show’s popularity in its letter to shareholders and claimed that 142 million member households chose to watch the title within four weeks of its premiere and said the show was its top-ranked title in 94 countries, including the United States.

While Netflix has highly publicized its “Squid Game” viewership statistics for several weeks, the company stated its intent to change how it shares viewership metrics with the public by the end of the year. In 2020, Netflix began tracking viewership based on accounts that watched a given program for at least two minutes — therefore, a subscriber would be counted as a viewer for an entire series even if that person never watched more than two minutes of a program. By 2022, the company will report how many hours are viewed of a given program, rather than how many viewers started watching. The company also promised to release viewership information “more regularly, outside of our earnings report.”

No major American streaming services regularly release transparent viewership data, but Netflix’s viewership reports have been a particular source of controversy in the journalism and entertainment industries for several years. It’s unclear how frequently Netflix will begin sharing viewership data in the future, but the company claimed in its Q3 report that it will begin releasing data more regularly.

“Later in the year, we will shift to reporting on hours viewed for our titles rather than the number of accounts that choose to watch them,” Netflix representatives stated in the company’s earnings report. “There is some difference in rankings, as you see below, but we think engagement as measured by hours viewed is a slightly better indicator of the overall success of our titles and member satisfaction. It also matches how outside services measure TV viewing and gives proper credit to rewatching. In addition, we will start to release title metrics more regularly outside of our earnings report so our members and the industry can better measure success in the streaming world.”

Netflix also provided new details about its video gaming initiatives, which the company first mentioned in its summer earnings report. The company noted that it acquired “Oxenfree” developer Night School Studio during the quarter, reiterated that games will be included in its members’ subscriptions, and said that its games would not feature in-game advertisements or in-app purchases. Netflix said it had begun testing games in various countries but it is unclear when the company’s gaming initiatives will make their American debut.

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