Netflix announced on Wednesday that it is launching a “test” in Chile, Costa Rica, and Peru in which subscribers can pay a reduced rate to share their account with someone who lives outside of their house. You know, what we’re all doing right now for free. It’s the streaming service’s latest attempt to monetize each family that watches its content, and it won’t be the last: Netflix’s most valuable members are running out. That explains some of the company’s recent membership delays, as well as the company’s current efforts to speed things up again. Netflix added 8.3 million customers in the fourth quarter of 2021, below its own forecast by approximately 200,000 subscribers.
In addition, the business offered a reduced estimate for the current quarter, anticipating 2.5 million new customers vs 4 million in the same months last year.
Netflix isn’t going to stop whether or not this South American experiment succeeds: The streamer is still a long way from reaching its goal of 1,000 subscribers. Netflix is “barely scraping the surface” of the world’s potential mobile customers, according to MoffettNathanson media analysts, but this larger remaining batch of prospective users has far lower RPUs (revenue per user) than broadband subscribers. Streaming subscribers are not developed — or monetized — in the same way. “Netflix still has a lot of potentials to grow in the wealthier countries of Europe, Japan, and South Korea, but the most promising development opportunities are in less developed countries,” says the company.
Increased rivalry in the streaming industry can be blamed for some of Netflix’s subscriber decline. The good news for Netflix is that MoffettNathanson believes the current struggle is unsustainable, and that some Netflix competitors will “start to tap out and step away from this business” in the “mid to long term.”
Without adding China, Netflix’s CFO Spencer Neumann recently stated that the company’s worldwide TAM (total addressable market) opportunity is 700 million-1 billion homes. On Tuesday, MoffettNathanson described the figure as “roughly correct” in terms of technology but “a little optimistic in terms of reality.” Between 400 million (the low end of broadband subscribers) and 1.1 billion is a more acceptable – but also considerably broader – TAM (the high end of broadband plus mobile subs). Netflix had over 222 million global customers as of the end of 2021. Netflix is already in 64 percent of broadband homes and 82 percent of pay-TV (usually, cable) homes in the United States and Canada, limiting domestic expansion. According to the MoffettNathanson team, the pay-TV statistic is a particularly good signal of readiness to pay for streaming services.