Netflix’s ‘Squid Game’ Success Highlights International Discounts

In streaming wars, the success of one business is the failure of another.

The Netflix “Squid Game” is an exception.

Netflix has its biggest hit with “Squid Game,” the bloody dystopian South Korean series that took the world by storm. Over 111 million viewers worldwide have already watched at least two minutes of the show.

Typically, successful series engender envy and anxiety about competition. Netflix outbid famous HBO for “House of Cards,†a complaint from HBO executives nearly a decade later. But some Netflix competitors are applauding the success of “Squid Game” as it opens the door further to non-U.S. Production, saving media companies tons of money if foreign language television is part of the content regime. of a standard American household. Amazon, Apple, Disney, WarnerMedia’s HBO Max, NBCUniversal, Lionsgate’s Starz, and ViacomCBS are all looking around the world for new TV series that will grab the world’s attention.

Hollywood studios are saving millions of dollars by hiring local talent instead of Hollywood stars, collecting tax credits and discounts from starving countries seeking perks in tourism and recognition, and avoiding strict US union regulations, said Ajay Mago, corporate and technology lawyer and managing partner for EM3.

“Different countries have different incentive packages,†Mago said. “Some countries will offer you free marketing through government channels or support at festivals. They may even offer you free local co-producers.”

Eastern European countries, such as Hungary, Austria and Malta, and Canada have long offered significant tax credits and incentives in Hollywood, said Domenic Romano, a lawyer specializing in the field of Hollywood. entertainment and managing partner of Romano Law. But in the past, American productions often used international locations as substitutes for American sets.

“They would come to Canada or some place that offered tax incentives, and they would put down American letterboxes and road signs, change the license plates on cars, and voila,†Romano said. “What is happening now is that there is local content from those regions. The studios are no longer being obscured.”

American audiences generally viewed foreign language films as niche content. Very few, if any, non-English TV series became part of the mainstream mind before “Squid Game”. Keeping local actors and sets saves a lot on production costs, Romano said. Swapping out expensive Hollywood actors to recreate reboots of hit foreign shows, as has been done in the past, can cost tens of millions of dollars per show, Romano said.

Disney said this week it plans to begin production on 27 new TV series and films in the Asia-Pacific region for Disney + and its Asian streaming service Disney + Hotstar. The total cost of creating “Squid Game” was only $ 21.4 million, Bloomberg reported this week. A senior entertainment official told CNBC the cost of “Squid Game” with U.S. distribution and union production regulations, which prevent long working days that are allowed in South Korea, probably would have been five to ten times more.

Investing in local international productions also saves Hollywood studios from investing in expensive intellectual property. Episodes of Disney + ‘s Marvel shows, such as “WandaVision” or “The Falcon,” cost Disney $ 25 million per episode – more than the nine episodes of “Squid Game” – and that doesn’t include the $ 4 billion that Disney paid to acquire Marvel in 2009. Amazon Prime Video’s first season of the upcoming “Lord of the Rings” series will cost $ 465 million, according to the neo minister. Zeeland Economic Development and Tourism. Amazon paid around $ 250 million for the rights to Tolkien’s property in 2017.

The success of “Squid Game†can also be a boon to creators who have felt stuck in an industry that has relied on superhero movies and reboots of old TV shows for reliable revenue. Harnessing the world in search of new stars and ideas enables new avenues of growth that can mutually benefit artists and studio executives.

“Netflix is ​​one of the world’s premier streamers in South Korea, and they’re trying to win the content race,†Romano said. “It’s as if the Cold War arms race is now the content race where streamers scramble to find content to stream exclusively so they can sign up subscribers before the competition escalates.”

Investors will have a better idea of ​​the success of “Squid Game” for Netflix’s results on October 19 when the global streaming giant announces its third quarter results.

Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.

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