Influential Sanford Bernstein media analyst Todd Juenger has long believed in the power of subscription video on demand king Netflix, predicting that the service would top 300 million worldwide subscribers by 2024. Now, in his most recent report, Juenger notes that in Brazil -- the second largest Netflix market behind the U.S. -- Netflix customers now outpace pay TV subscribers.
Netflix’s growth in Brazil has been rapid. According to Juenger, there were about 6.5 million Netflix customers in Brazil in 2017, more than doubling to 17 million by 2020. Pay TV, with about 16 million customers in 2020, lost about 3 million subscribers in the same time frame, the analyst wrote.
“Brazil matters: at 17 million plus subs, it is almost certainly Netflix’s largest market outside the U.S. in number of subscribers,” Juenger wrote. “And we expect many of the dynamics at work there are also playing out across other foreign countries, especially middle income/emerging markets.”
Even at No. 2, Brazil is still far behind the U.S. market, which has about 73 million subscribers. Globally, Netflix has about 193 million customers. But even in the U.S., the gap is narrowing. According to MoffettNathanson, there were about 79 million traditional pay TV customers in the U.S. in the second quarter, down from 80 million in Q1.
According to Juenger’s report, Netflix’s entrance into the Brazilian market wasn’t easy. It cracked the largest country in South America in 2011, and pretty much had the SVOD space to itself until 2015, when its first competitor -- Globoplay, a streaming service from Portuguese-language content producer Globo -- entered the scene. 2015 also was the beginning of a devastating recession and high unemployment in Brazil, and though Globoplay was priced at about one-third of Netflix, it only has about 6.5 million customers today.
Juenger added that Netflix has prevailed despite Globo’s refusal to license any of its Portuguese-language content to the streamer. So, in a country where 99% of the population speaks Portuguese (opens in new tab), Netflix has managed to attract three times the subscribers of its largest competitor by offering content in a language most don’t necessarily understand (English and Spanish) at a higher price (about 32 Brazilian real per month, according to Juenger). Granted, many Brazilians speak several languages and economic factors likely played a big role in the shift from traditional pay TV, but those alone don't explain Netflix's huge popularity in the country.
“Netflix provides a superior product at a quarter of the price of pay TV, and can be shared across different households much more easily than a pay TV subscription,” Juenger wrote, adding that Netflix hasn’t fueled growth by keeping prices low.
“Netflix has raised prices of its Standard plan five times since its introduction in September 2011, more than doubling in nominal terms and up 37% in constant domestic currency,” Juenger continued.
According to the analyst, Brazilians are watching a wide variety of programming, but not the same as their U.S. counterparts. According to Juenger, the top shows in Brazil are mostly Netflix originals, and mostly in English. He added that 58% of the shows that made the Brazilian Top 10 never made the U.S. Top 10.
Competition in Brazil is expected to heat up in the next several months, with Disney Plus slated to launch in mid-November and HBO Max next year. But Juenger sees little impact from these services because he believes they are primarily competing on price -- Disney Plus at a 12% discount to Netflix and HBO Max still undisclosed. Amazon (the online retailer, not the rain forest) launched its full Prime package (video and the free delivery service) in 2019 and has grown quickly -- in September 2019 Amazon claimed Brazil had the fastest rise in Prime members in the online retailer's history. Still, that could be mainly because of pricing -- Prime is offered at a 70% discount to Netflix -- and free product delivery.
“We doubt any of these services will be able to match Netflix's popularity in Brazil,” Juenger wrote, citing Google search statistics that show interest in Netflix far outweighs the competition. “We believe this is driven by Netflix being the first-mover and only relevant streaming service in Brazil for a while (not different than in other countries), as well as due to its massive production of high-profile content and an underlying strong technology base.”
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Mike Farrell is senior content producer, finance for Multichannel News/B+C, covering finance, operations and M&A at cable operators and networks across the industry. He joined Multichannel News in September 1998 and has written about major deals and top players in the business ever since. He also writes the On The Money blog, offering deeper dives into a wide variety of topics including, retransmission consent, regional sports networks,and streaming video. In 2015 he won the Jesse H. Neal Award for Best Profile, an in-depth look at the Syfy Network’s Sharknado franchise and its impact on the industry.
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