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While Netflix has had little difficulty gaining steam in the US market- even if it hasn’t been going all too smoothly lately- the company is facing some significant hurdles to similarly entrench itself with customers to the south as it expands into Latin America.
The US market and Latin American markets diverge in two key areas- DVDs are a strong component in the former, and potential users in the latter tend to have lower incomes and are less likely to have access to broadband for streaming films. The two conditions have created a market that has a few significant hurdles for the service to take off in the countries south of the border, although Netflix is actively trying to overcome the challenges.
The service is priced at the same $7.99 as the US market in most countries, but stands at $7.24 a month in Mexico. Bloomberg indicates that Netflix CEO Reed Hastings addressed the disparities back in July as the service readied for launch in the large market:
Lower incomes, less broadband availability and competitors such as Telefonica SA’s TerraTV and Carlos Slim’s Net Servicos de Comunicacao SA will complicate the effort, Chief Executive Officer Reed Hastings said in July. Compared with the U.S., fewer Latin Americans have credit cards, the main Netflix payment tool, and fewer have Internet-ready game consoles.
“It will be slower because of payment methods and because of video-game consoles,” Hastings said.
In order to achieve profitability in the market, Netflix will need to grab 10% market share in the countries. On Friday, Netflix stock closed 63% lower than its July high of $304.79.
