Why will Netflix increase fees in Latin American countries?

October 7, 2022

Netflix has announced that it will increase its fees for Latin America, this in the midst of a crisis for streaming platforms worldwide.

In mid-July of this year, Netflix announced that users in Argentina, Dominican Republic, Honduras, El Salvador and Guatemala will have to pay an extra fee if they want to use the service in more than one household. This extra fee varies by country and will be between USD $1.70 and USD$2.99.

This increase will allow users in Argentina, Dominican Republic, Honduras, to use the platform in one or three additional homes, depending on the type of subscription, and regardless of the type of device where it is viewed.

According to the company, this measure was implemented after reviewing the options for users who choose to share their accounts to pay a little more. Back in January of this year, Netflix had already increased its subscription fees, and it seems that both decisions are the company’s strategy to avoid going into the red.

Streaming crisis?

The pandemic and the subsequent confinement caused an accelerated growth for streaming platforms. Many production and entertainment companies saw in this service an opportunity to launch their productions. Thanks to this, users saw a considerable increase in the number of platforms offered in just a couple of years.

However, the return to a new normality and the end of the confinement has put a brake on this growth and most of the streaming platforms have lost subscribers, considerably.

Undoubtedly, one of the most affected platforms is Netflix, which, in the last year, for the first time in the last ten years, has drastically lost subscribers. In fact, web analytics firm Similar web claims that the platform lost 1.7 million subscribers in April alone.

Subscriber loss is not the only problem, as Similar Web also claims that the platform lost nearly 25% of its streaming traffic over the past three years. After its quarterly report to investors, Netflix shares fell 27.2 %, of course this translated into the cancellation of many of its productions.

Even for HBO Max, which started only in May 2020 and quickly positioned itself as one of the public’s favorites thanks to productions in its catalog such as The Sopranos or Boardwalk, things are not looking very good, and executives began to take some measures to prevent losses.

After its merger with Warner Bros. and Discovery, the platform will undergo major changes, especially announcing a budget cut of 3 billion dollars, which means the cancellation of original productions.

For now, it seems that Disney+ is saving itself from the crisis, however, its subscriptions in India, one of the most important markets, may start to decline after losing the rights to the most important content for the country: the national cricket league.

Looking at the metrics of the platforms these changes and loss of subscribers are not so alarming, especially for entertainment giants such as Netflix or Warner Bros, however, the reality is that the accelerated growth of this business model reached its peak and now comes a stage of consolidation, so each platform will have to reform its business model to stand out from the competition.

Reforming the business model

Undoubtedly, the end of the confinement and the wide offer of streaming services are two of the reasons why platforms are seeing their subscriber numbers decrease. This year, some of them have had to make changes in the business model to weigh current and future losses.

For now, it seems that Netflix’s plan to avoid falling into crisis is to increase prices in subscription fees, especially for those who share their accounts. However, it seems that this will not be the only measure. Netflix’s future project is to offer a cheaper service with the same content, but with advertising.

Other platforms are also implementing changes in their business model, for example Warner Bros decided to reduce the budget for productions, in addition David Zaslav CEO of the company has reiterated its commitment to exclusive releases in theaters while announcing the possibility of creating cheaper subscription plans with ads.

 

Now it’s your turn, tell us do you think that the increase in fees can be the solution to the problems of Netflix and other streaming platforms?