Streaming Video Netflix CEO Reed Hastings will not be at the Allen & Co. mogul-fest in Sun Valley this week, sending chief content officer Ted Sarandos instead. Turns out, Hastings had better things to do, like announcing 
Netflix’s expansion into 43 countries in Latin America.
Starting later this year, Netflix users in Mexico, South America, Central America and the Caribbean will be able to watch a mix of local and TV and movie content streamed to their connected TVs or CE devices, as well as PCs and mobile devices.
The move is a smart one by Netflix as it looks to build its international business beyond its initial foray into Canada. The Latin American market has an estimated user base of 215 million, compared to 245 million in the U.S., according to Think Equity analyst Atul Bagga, providing a lot of room for growth. While the European market is larger, Netflix likely faces many fewer hurdles by heading south instead of east:
- The language situation is much simpler than it would be in Europe, requiring only Spanish, English and Portuguese. Expanding into Europe will mean operating in dozens of languages.
- Licensing non-local content is likely to be simpler as well. Latin American rights can often be acquired as a package, whereas rights for each European country currently must be acquired separately. Later this summer, the European Commission is expected to begin considering a proposal to require cross-border licensing of audio and video content throughout the bloc, but until the rules are settled, acquiring rights for Europe will be risky.
- Most critically, Netflix will face less entrenched local competition in most of Latin America than it will in Europe, where companies like LoveFilm in the U.K. (owned by Amazon) already offer unlimited subscription streaming.
Beyond the lower barriers to entry, Latin America offers Netflix a lot of benefits as well. Mexico has a very large film industry that cranks out a lot of content suitable for the Latin American market. Mexican television networks also churn out highly popular Telenovelas, providing another rich vein of content to mine. All told, there is plenty of local content on which Netflix can build its subscriber base and for which rights are probably available at reasonable prices.
Just as critical, the small number of languages used throughout Latin America and the Caribbean (certainly compared to Europe) will allow Netflix to concentrate its marketing and branding firepower — an issue Hastings has identified as key to Netflix’s expansion into territories where it doesn’t currently operate.
Together, the breadth of local content available and the ability to concentrate its marketing provides Netflix with a chance to scale its subscriber base quickly, enhancing its global clout with content owners before it takes on more challenging markets.
Investors seemed to agree, sending Netflix shares up nearly 17 percent in midday trading Tuesday, no doubt causing plenty of teeth-gnashing in Sun Valley.