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The success of Netflix’s ‘Squid Recreation’ highlights worldwide reductions

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Scene from Netflix’s “Squid Game”

Source: Netflix

In the streaming wars, one company’s success is another’s failure.

The “Squid Game” from Netflix is ​​an exception.

Netflix had its biggest hit of all time with Squid Game, the bloody dystopian South Korean series that took the world by storm. More than 111 million viewers worldwide have already seen at least two minutes of the show.

Typically, hit series generate envy and fear of competition. Netflix famously outbid HBO for “House of Cards,” a lawsuit brought by HBO executives nearly a decade later. But some of Netflix’s competition is cheering Squid Game’s success because it further opens the door to non-US productions and allows media companies to save tons of money when foreign language television becomes part of the content diet of standard American households. Amazon, Apple, Disney, WarnerMedia’s HBO Max, NBCUniversal, Lionsgate’s Starz, and ViacomCBS are 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 hungry nations looking for tourism and recognition problems, and avoiding strict American union regulations, said Ajay Mago, a lawyer for corporations and Technology and managing partner for EM3.

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

Eastern European countries like Hungary, Austria and Malta, as well as Canada, have long offered Hollywood significant tax breaks and incentives, said Domenic Romano, consumer electronics attorney and managing partner of Romano Law. But in the past, US productions often used international locations as substitutes for American sets.

“They came to Canada or somewhere that had tax incentives and they dropped off American mailboxes and street signs, changed license plates on cars, and voila,” Romano said. “What is happening now is that there is local content from these regions. Studios no longer dress up.”

American audiences have typically viewed foreign language films as niche content. Very few, if any, non-English language TV series became part of the mainstream zeitgeist prior to Squid Game. If you keep local actors and sets, you save a lot on production costs, Romano said. Replacing expensive A-list Hollywood actors to recreate reboots from successful overseas shows, as it has done in the past, can cost tens of millions of dollars per show, Romano said.

Intellectual property saving

Disney announced this week that it will begin producing 27 new TV series and films in the Asia Pacific region for Disney + and its Asian streaming service Disney + Hotstar. The total cost of making Squid Game was only $ 21.4 million, Bloomberg reported this week. A top entertainment executive told CNBC that the cost of “Squid Game,” with a US cast and union production regulations preventing the long work days allowed in South Korea, would likely have been five to ten times more expensive.

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

The success of “Squid Game” can also be a boon to creators who have found themselves stuck in an industry that relied on superhero movies and reboots of old TV shows for reliable revenues. Opening up the world for new stars and ideas enables new growth paths from which artists and studio managers can mutually benefit.

“Netflix is ​​one of the first global streamers in South Korea trying to win the content race,” said Romano. “It’s like the Cold War arms race is now the arms race where streamers come down on each other to find content that can be streamed exclusively so they can get subscribers before the competition does.”

Investors will have a better idea of ​​how successful Squid Game has been for Netflix on October 19 when the global streaming giant announces third quarter results.

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

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