One of the pieces of conventional wisdom about Netflix and its competitors in pay cable is that cracking the international markets would let them keep costs lower in the United States by monetizing individual pieces of content on a much broader scale. But The Hollywood Reporter’s wrapup of the financial reaction to Netflix’s quarterly earnings report has this interesting and important observation from “SIG Susquehanna Financial Group: “Internationally, challenges appear to persist in Latin America. Management highlighted low device penetration, insufficient Internet infrastructure, and consumer payment challenges as the main obstacles. We think these are necessary but insufficient conditions. Netflix may be too early and the consumer isn’t ready: pay TV penetration in Brazil, Mexico, and Argentina is currently around the levels the US reached in 1980 (one year after ESPN was launched and one year before MTV started), 1990, and 1994, respectively.”
I think I’d expected the broadband and device issues, but the low pay cable penetration rates came as something of a surprise to me. The Emmys this year, and the critical consensus of a decade, cement the idea in the United States that cable is where momentum in television lies. And I think our sense of the landscape and what audiences crave and can afford is somewhat distorted by the excellence of British programming, particularly that which plays in syndication overseas. That’s not to say that international audiences are less sophisticated, or producing content of lower quality, or that shows like Game of Thrones don’t do well when they’re syndicated to audiences that are prepared to embrace them. But it’s a reminder that while there might be gold in them thar hills, it may be some time before it’s actually possible for companies to excavate it, and for them to reap the rewards we expect will keep our prices low and make it possible for companies to experiment with new business models.