Is Netflix Heading South?

You can rent Brazil and The Boys From Brazil through Netflix (Nasdaq: NFLX  ) , and in a few months, you will be able to get your hands on Rio -- likely 28 days after everybody else, of course.

In a few months, there may be an entirely new connection between Netflix and Brazil.

Latin America appears to be the video rental giant's next international market, with Brazil as the likely initial target for expansion.

Bloomberg is reporting that Netflix is in negotiations with Disney (NYSE: DIS  ) , Lions Gate Entertainment (NYSE: LGF  ) , and Viacom's (NYSE: VIA  ) Paramount for Latin American streaming rights to their older celluloid vaults.

Will a "streaming only" product fly in Latin America? Skeptics wondered the same thing about Netflix's entry into Canada last year. Seven months later, Netflix is up to 800,000 subscribers.

The couch potatoes are there. DIRECTV (Nasdaq: DTV  ) has 5.8 million satellite television subscribers in Latin America. It also has a 41% stake in Sky Mexico and its more than 3 million accounts.

Latin America is also Web savvy. Regional marketplace operator MercadoLibre (Nasdaq: MELI  ) is one of the faster growing online companies, with Brazil making up more than half of its revenue.

Netflix has already indicated that it will enter a single new territory later this year, following that up quickly with a new market early in 2012. The United Kingdom is a logical target for either slot. Latin America makes sense for the other.

It remains to be seen if Netflix will introduce itself throughout Latin America in a single shot or if it will cherry pick between the countries. Brazil and U.S. neighbor Mexico would make the most sense as launch markets.

It also bears pointing out that while most of Latin America speaks Spanish, in Brazil, it's Portuguese. In other words, it's not just about licensing. There will be country-specific dubbing or subtitle overlaying to tackle.

Latin America makes sense, but it won't make cents in the near term. Netflix expects to rack up $50 million to $70 million in operating losses during the second half of the year as it seizes the global expansion opportunity.

You can't rent Road to Rio from Netflix, but I'm guessing that CEO Reed Hastings knows it quite well.

Which international markets should Netflix target after Canada? Share your thoughts in the comment box below.

MercadoLibre is a Motley Fool Big Short short-sale recommendation. MercadoLibre is a Motley Fool Rule Breakers pick. Walt Disney and Netflix are Motley Fool Stock Advisor recommendations. Alpha Newsletter Account, LLC has bought puts on 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.

Longtime Fool contributor Rick Munarriz has been a Netflix shareholder -- and subscriber -- since 2002. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 05, 2011, at 7:33 AM, Memeann wrote:

    You can rent Road to Rio. I've done it.

  • Report this Comment On May 05, 2011, at 2:51 PM, jb757 wrote:

    You don't need local big time sports usually on cable/sat?

  • Report this Comment On May 06, 2011, at 12:32 AM, lowmaple wrote:

    They wouldn't need too much dubbing for austrailia

  • Report this Comment On May 06, 2011, at 2:03 AM, Risky88 wrote:

    I think they should tackle europe as a whole, they have twice as many people as the U.S. to say that no one there is going to like to watch movies online is crazy

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