Netflix won’t break even in LatAm for years

Juan Pablo Conti ©RapidTVNews | 26-10-2011

Nearly two months after announcing that it was ready to conquer Latin America with its over-the-top (OTT) video service, Netflix has admitted that it will be difficult to operate at a profit there for the next 24 months.
"We are just beginning in this market with a lot to learn and a lot we can improve over time," acknowledged the company in a letter addressed to investors, before warning: "It's too early to tell whether we will reach run-rate break-even within two years as we would like."
Signed by CEO Reed Hastings and CFO David Wells, the letter also provides the first real indication of the number of subscribers that Netflix has managed to sign up in the 43 Latin American countries where it launched this September. While it doesn't mention any specific numbers, the statement does talk about "hundreds of thousands" of viewers.
By the end of 2011, the OTT player reckons its subscriber base in the region should be a little larger than its Canadian subscriber base was at the end of 2010.
Launched 12 months earlier than in Latin America, Canada represented Netflix's first experience outside the United States. While the company never confirmed how many customers it had in Canada by the end of 2010, it is known that – as of the end of March 2011 – it had approximately 800,000 viewers.
This suggests Netflix is projecting somewhere around half a million Latin American subscribers by Christmas – which, in turn, suggests the company is yet to reach the 200,000 or so subscriber mark.
Considering that as part of its launch strategy the OTT operator has been offering a "one-month-free-trial" promotion, it is not hard to conclude that Netflix is yet to begin generating any significant amount of revenue in LatAm.
Still, the company remains optimist about the region's long-term prospects: "Now that we are serving hundreds of thousands of Latin Americans, we can measure what is getting enjoyed a lot and what isn't, and adjust our mix of content accordingly," Hastings's letter read.
Less optimistic about Netflix's long-term future – not just in Latin America but anywhere else – were investors. A huge share sell-off yesterday saw the company's market capitalization drop by nearly 35%.