'Squid Game,' David Chappelle and Netflix's FOMO paradox
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Wednesday, October 20, 2021
The people want their entertainment — and that’s what matters to investors
To understand why Netflix’s (NFLX) third quarter results completely obliterated market expectations in the face of a festering public relations firestorm, it’s perhaps best to connect a few abstruse ideas.
In the space of a month, the streaming behemoth has (in their words, not mine) “pierced the cultural zeitgeist.” It managed to do so not once but twice: via its dystopian drama “Squid Game” — a runaway global hit topping Netflix’s charts in 94 countries and drawing in 142 million households — and Dave Chappelle’s polarizing comedy special, “The Closer,” that stands accused of transphobia.
The Chappelle imbroglio has become something of a culture war Rorschach test, which we needn’t delve into in this space — at least not today.
However, it’s worth noting that, despite more than a week of bad press, Netflix’s stock is comfortably perched within shouting distance of a 52-week high at $646.84 — and Wall Street is as bullish as its ever been even though the “stay-at-home” phase of the pandemic is gone (hopefully for good).
According to Bank of Montreal, which has a $700 price target on the stock, near-term catalysts driving the stock include “new and returning original content that drives critical and audience word of mouth/social media recognition.” And Bank of America, which sees the stock hitting $680 in the near term, cited data showing worldwide cancellations actually fell in Q3 when compared to Q2.
All of that matters, because like it or not, Netflix’s constituency is literally all of Planet Earth where each region and its occupants see the world in starkly differing terms. Not only is the "fear of missing out" (FOMO) real, it drives eyeballs to the platform, regardless of controversies.
The streamer now has “hit series in Latin America, in India, in local markets. They have the mind share and market share in those areas,” Manhattan Venture Partners' Santosh Rao told Yahoo Finance Live on Tuesday.
“What they’re doing now is really globalizing local content, which we saw with 'Squid Game,'” he added.
In short, “Squid Game’s” monster success shows how Netflix’s global strategy can insulate the platform from local tempests in a teapot like the Chappelle controversy. What may not be culturally palatable in the U.S. may be perfectly acceptable in other countries like Latin America, Asia or Africa, where social mores differ and content may not be subject to the vagaries of culture wars.
In all probability, Netflix subscriber numbers will keep climbing — and by extension, so will the stock — because of two uncomfortable yet unassailable truths:
Perpetually aggrieved viewers are simply dwarfed by people who don’t care; and
Among those who legitimately do care, most want their regular fix of “You," “Squid Game," “The Tiger King," or whatever pop culture contrivance dominates social media discourse — even if they won’t admit it publicly.
If last year’s controversy over “Cuties” (covered at the time by Yahoo Finance’s Allie Canal) wasn’t enough to undermine the company’s subscriber growth, it's unlikely anything will. And in the interest of full disclosure, yours truly was turned off by the images of gyrating pre-teens, but I responded by — you guessed it — choosing not to watch instead of stirring up social media outrage, or canceling my membership.
The lesson of “Sense8," a cult favorite that was prematurely canceled by Netflix because of low viewership, is writ large. While some people were big fans, it was obvious that it simply wasn’t everyone’s cup of tea (Another disclosure: I bailed after one episode), and led the company to pull the plug.
Histrionic headlines aside, the standard to bear in mind is that, as a publicly traded company, Netflix's core constituency is its investors. The axe will fall on a show when it can’t reach a critical viewing mass, or when the platform stops serving up content that people clearly seem to want.
Not because people on the internet are "Big Mad," as the kids say these days.
By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek
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