Netflix Brings It to Brazil

It's not just shares of Netflix (Nasdaq: NFLX  ) heading south these days.

The video smorgasbord operator officially launched its streaming service in Brazil yesterday. The country becomes Netflix's third market after last year's successful foray into Canada.

It's not just Brazil on the expansion menu. Netflix will roll out its service throughout Latin American and the Caribbean in the coming days. It will have added 43 countries to its existing North American stronghold by Monday. Suddenly everyone else feels like a slacker!

Latin America is a logical market for Netflix. DIRECTV's (Nasdaq: DTV  ) success in landing millions of subscribers for its satellite television service proves that there are enough couch potatoes with money to spend throughout the region.

Having all 43 new countries in tow by next week will also make it easier to get a clean read on the initial demand when it reports on its current quarter and a full three months of operation to gauge its success in the fourth quarter.

If Latin America follows Canada's adoption, we can expect a swift spike in initial demand but decelerating growth in the subsequent quarters.

This may prove to be problematic. Let's take a look at the net additions in Canada through the service's first four quarters.

 

Net Additions

Total Canadian Subs

Q3 2010 0.13 million 0.13 million
Q4 2010 0.38 million 0.51 million
Q1 2011 0.29 million 0.80 million
Q2 2011 0.16 million 0.97 million

Source: Netflix.

Canada's service also rolled out in early September last year, so the third-quarter number really represents just a couple of weeks. Is it troublesome that net additions peaked during its first full quarter of operation during last year's fourth quarter? Will Latin America migration decelerate through 2012?

Things are already proving to be a challenge. Some Brazilians are already chiming in on Netflix's blog, complaining that the service offers too many American movies dubbed in Portuguese, without the option of being streamed in the original English audio but with subtitles in Portuguese.

Netflix scored a coup earlier this summer when it struck a multiyear content licensing agreement with Grupo Televisa (NYSE: TV  ) , and that will be a major help in many of this week's expansion markets. Will that be enough, though?

This shouldn't take away from the amazing feat that Netflix is attempting right now. Going from two countries to 45 in eight days is an amazing achievement. This should leave no doubts that Netflix can ramp up its infrastructure to go global.

It already has a busy slate planned for 2012 as it takes on Amazon.com's (Nasdaq: AMZN  ) Lovefilm in Europe before continuing its eastward expansion.

The next few days will be busy for Netflix, but given the calamity over content deal renewals closer to home a little distraction overseas isn't necessarily a bad thing.

Will Netflix fail or succeed in Latin America and the Caribbean? Share your thoughts in the comment box below.

Motley Fool newsletter services have recommended buying shares of Amazon.com and Netflix. Motley Fool newsletter services have recommended buying puts in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder and subscriber since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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