Bloomberg Línea — Netflix (NFLX) said Thursday during the release of its Q4 2022 results that it expects to see subscription cancelations with the launch of the paid subscription-sharing service, following its experience in Latin America, and which could impact growth in terms of customer numbers.
“From our experience in Latin America, we expect some cancelation reactions in each market when we roll out paid sharing, which impacts near-term member growth. But as borrower households begin to activate their own standalone accounts and extra member accounts are added, we expect to see improved overall revenue, which is our goal with all plan and pricing changes,” the company said.
Worldwide, the company added 7.7 million subscribers in the fourth quarter of 2022, beating analysts’ expectations. The streaming service saw a 0.68% drop in revenue in Latin America versus the third quarter, but which is still above $1 billion.
The number of paid subscribers in the region grew 4.4% quarter-on-quarter to 41.7 million. New paid subscriber additions increased to 1.76 million. The average revenue per member fell slightly by 3.2%, totaling $8.30 million.
Platform growth in Latin America was 7% in FX-neutral last quarter, the lowest quarterly growth since 2022.
“We believe the pattern will be similar to what we’ve seen in Latin America, with engagement growing over time as we continue to deliver a great slate of programming and subscribers sign-up for their own accounts,” the company said.
Netflix also said that in Mexico, Brazil and Poland, the streaming platform is still less than 5% of the TV audience, with 4% of views in both Mexico and Brazil in December 2022.
In the US and UK, in comparison, Netflix’s percentage is 8% and 9% respectively.
In its latest report on Netflix, market research firm eMarketer has shown that the streaming platform is likely to face an uphill battle for its ad-supported streaming service, as current subscribers are not interested in making account downgrades - with 73.4% of those surveyed by eMarketer in Latin America saying they will keep their current ad-free subscriptions.
However, according to eMarketer, the company has an opportunity to scale its ad-supported offering among Latin America’s middle and lower classes.
Matteo Ceurvels, senior analyst for Latin America and Spain for market research firm eMarketer, told Bloomberg Línea that “Netflix viewers see value in its higher-tiered plans. For many, the thought of losing their ad-free viewing experience, premium video quality, and ability to download programs is a no-go. These features have long been vital to Netflix’s success in Latin America, and users are not interested in parting ways with them.”
Data from eMarketer shows that Netflix viewership and penetration in Latin America is projected to grow to 172.3 million in 2026.
“Netflix will look to less affluent consumers for future growth. The company has an enormous opportunity to scale its ad-supported offering among Latin America’s lower and middle classes. These two cohorts have been most negatively affected by rising inflation and dwindling disposable income, putting the cost of a monthly Netflix subscription out of reach for many households,” Ceurvels said.
According to eMarketer, the penetration of Netflix views in Latin America in 2023 should reach 79.4% of the subscription of users of the video on-demand service, higher than in all other regions of the world.
“Netflix will dominate paid streaming - with or without ads. Despite growing competition from companies like Disney Plus – and its ad-supported tier, which launched in December 2022 – Netflix remains a force to be reckoned with as Latin America’s most popular subscription video service,” Ceurvels said.
“This year, we estimate that 79.4% of subscription OTT viewers in Latin America, or 142.9 million people, will watch Netflix at least once per month. That will make the region Netflix’s most penetrated market (among subscription OTT viewers) in the world.”