Early Going for Netflix in Cuba

Just as you have to get out of bed by 6 a.m. and get to the beach by 7 a.m. if you hope to find a good spot, so too, when it comes to capturing a share of a specific market, it’s a good idea to arrive early at the “beach.” Netflix, the American company that produces and distributes media content online, has started business in Cuba following renewed ties between Cuba and the United States. The first impression is paradoxical. There is little Internet in Cuba — the rate of access is about 5 percent; most of its people probably don’t know that they can attain services through the web and a Netflix subscription, $7.99 per month, is expensive when compared to the average Cuban salary of around $20. Cuba is a country with a small banking structure, and with a minimum percentage of credit card use — which is required to register to watch movies and TV series. MasterCard has announced that it will start operating on the island on March 1, and American Express will soon do the same. The point is that until optimal conditions are achieved, Netflix will do business in a very restricted, almost deserted, market.

As mentioned above, in Netflix’s favor is the ability to make early gains in the market share, but not only that. Netflix is, above all, betting on the intangible element of faith. It trusts that the openness called for by Obama and Raúl will signify a banking increase in Cuba, and that commercial exchange and salaries will grow, helping to cement a middle class. The implied message in Obama’s decision is this: Democratization and wealth creation will be easier without the embargo. Netflix has caught on to this idea and is the first in line for any potential dealings.

Such a risky gamble carries with it an emotive value. In the future, Netflix executives will be able to exploit the fact that they were the first ones to trust the Cuban market; and Cubans themselves will no doubt express their gratitude by increasingly bonding with a market that sells emotions — all of course depending on prices. We shouldn’t assume that everything will be rosy. All in all, Netflix’s decision is not that bizarre.