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Netflix courts Latin American content – but is that it’s next destination?

According to a new report in London’s Financial Times, Netflix is planning to launch next in Latin America, specifically Argentina, Brazil, Chile and


Published: 12 May, 2011


According to a new report in London’s Financial Times, Netflix is planning to launch next in Latin America, specifically Argentina, Brazil, Chile and Mexico, rather than to make its next port of call Europe.

We have some trouble understanding this, given the low rate of penetration in Latin America for broadband lines. That’s not to say we don’t actually believe the story, which is simply that negotiations have gone ahead with Grupo Televisa and TV Azteca of Mexico, and Globo of Brazil, but there are a number of ways to interpret this.

Spanish content is very valuable in the US itself. We understand that while Brazilian content is Portuguese much of it also exists in translated form for distribution around Latin America, so all of this deal may be a side step around US studios, buying access to content for US citizens.

There are around 35 million Spanish speakers in the US who use it as a primary language, and a further 10 million who use it as a second language. In fact there are more Spanish speakers in the US than in Spain. We have frequently covered stories about this network or that pay TV operator adding Spanish language content to its channel line-up, because this is a significant portion of the US population. However if we were Netflix and we were talking to Latin American content producers, we would a) want that content for a special Spanish service in the US b) want that content for online delivery in Latin America and c) want that content for delivery even in Spain – why do a negotiation about a single territory when there are several you can hit in one negotiation.

If we take the 4 proposed territories they are very different. Mexico and Brazil are the pay TV powerhouses of Latin America – Brazil has 8.9 million pay TV homes now and will have around 20 million by the end of 2014 (See Rethink Latin American Pay TV report). Mexico has 9.7 million pay TV homes today and this will grow to 18.7 million pay TV homes by 2014. These are strong markets growing very rapidly, with 26% and 40% growth respectively during 2010.

Argentina by contrast has 6.8 million pay TV homes and is growing more slowly, at just 6.8% last year, while Chile is tiny at just 1.9 million pay TV homes although it is growing a little faster at 17.8%. Netflix has consistently said that it will launch into a single international market during 2011, and if it works out, it will then proceed to roll out internationally as fast as it can. These two markets (Argentina and Chile) really don’t qualify as good international test beds worth all the extra hassle of separate launches.

By comparison Germany and France have high pay TV penetration, closer to the USA, and high broadband penetration, both with around 25 million pay TV homes. The UK is almost 14 million pay TV homes. Tracking pay TV tells you that people are used to paying for video services. And broadband lines in these countries are closer to 8 Mbps to 10 Mbps on average – so Netflix would have the capacity to push video to the majority of the population. The same is true of parts of Asia such as Korea or Japan, but there are bigger cultural and content barriers for those markets.

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