By year end, last year, it was announced that Netflix might eventually enter the Latin American market, among other regions, after the expansion they already started in North America with Canada. Coverage done by Enter.co (in Spanish) ends their article with the question: Would our regional movie rental stores be ready for their market entrance? The answer clearly is no. But instead of making questions with protectionist overtones, we could ask ourselves, will the customer benefit from Netflix’s arrival? I think they do.
What is the service? For less than $10 dollars (in the USA market), the user has the right to a DVD at home (1-8 DVDs in a month, depending on the frequency with which you return them), as well as an unlimited number of movies on demand (only seconds after pushing play). This price would not have additional charges, like the traditional one for late returns. For those users watching more than a couple movies per month, this may be more economical than any of the available alternatives.
On the other hand, you have the selection of the catalog. Traditional rental stores usually have a limited number of copies from each movie, while Netflix, with exclusive discs for the DVDs, can have as many copies as are being demanded. Even in the case of popular new arrivals, the shipping of movies usually won’t take more than a couple days. On the other end, the catalog includes old classics, as those pioneer movies from the 30s. Many of these movies are available on demand, culturally exposing Netflix users. This is rarely seen in traditional rental stores.
Then comes the servie. Netflix movies arrive to your mailbox, and are picked up from the same place. Netflix holds a list of movies the user wants to watch, and ships them in the list’s order, which can be changed at any moment. If this doesn’t sound extremely convenient, we still have recommendations. In my last rental store, I had the luck to have a knowledgeable store manager, who knew my taste, and used to give me good recommendations. Some times he would give a poor recommendation.
Netflix is virtually never wrong. This is perhaps the biggest strength for Netflix, which will take very long for local stores to imitate, unless they started soon after Netflix showed up. By taking each users preferences individually, and searching for correlations to users with similar tastes, Netflix’s predictions are usually very accurate. With years in the market, and the preferences from millions of users, this is a reliable element from Netflix’s experience, by allowing to find movies that each user is guaranteed to enjoy. If I ever said “I didn’t like this movie,” it’s because I didn’t obey their recommendations. If it wasn’t an automated algorithm, Netflix would tell me “I told you so!”
Finally, and perhaps more importantly, theres the potential for a behavioral change in the customer. In our digital world, Latin American countries are stigmatized for their lack of protection to intellectual property. In a talk with one of the CEOs of a major software company, he referred to our countries as “one disc countries.” He was talking about digital content producers’ fear with regards to the rampant piracy on our countries.
Such piracy also exists in countries with more regulation on the topic. In a way, such fearful treatment of Latin American countries, is part of the problem. By affecting distribution, access is limited and cost increased, for countries with lower purchasing power, creating the incentives for the illegal activity (without trying to justify it). Business models such as Netflix’s, may change the landscape. If suddenly in the region it is possible to find virtually every movie ever produced, with convenience and a fraction of the cost, even against the pirate version, why would a user promote such piracy?
Maybe, if Netflix negotiates a catalog with similar breath for the countries in the region, it could become the corner stone for a renewed trust from content producers. Based on the convenience of a lower cost digital distribution, this would allow them to access this huge market segment that is already consuming their products, but that in many cases find piracy as the only means to access them. This is particularly valuable, if regional countries want to move from exporting raw materials and basic products, to more evolved economies, basing their growth on services, experiences, IP, brands, and added value.
