Netflix goes to Cuba. Will wider Internet access follow?

Netflix expanded into Cuba Monday, giving residents access to movies and shows like 'House of Cards' and 'Orange is the New Black.' Just 5 percent of Cubans have access to an Internet connection strong enough to use Netflix, but easing relations between the US and Cuba could help. 

Paul Sakuma/AP/File
Netfilx headquarters in Los Gatos, Calif. Netflix on Monday, Feb. 9, 2015, announced it is launching its movie and TV show streaming service in Cuba as Internet access in the country improves and credit and debit cards become more widely available.

The US took big steps in softening its relations toward Cuba late last year, and now American companies are beginning to test the more open business waters of the Communist island nation. 

Netflix launched Monday in Cuba, giving residents access to the streaming film and TV subscription service’s library of media content, including original shows like “House of Cards” and “Orange is the New Black.” Subscriptions will be available at $8 a month for Cubans with access to broadband Internet and international payment methods, like credit cards.

“We are delighted to finally be able to offer Netflix to the people of Cuba, connecting them with stories they will love from all over the world,” Netflix co-founder and CEO Reed Hastings said in a press statement. “Cuba has great filmmakers and a robust arts culture and one day we hope to be able to bring their work to our global audience of 57 million members.”

The launch comes on the heels of the White House easing its travel and trade restrictions on Cuba after five decades of strict economic embargo. Among other things, the US eased constraints on certain key imports and exports ­ ­– including phone and Internet equipment.

Still, for Netflix, a move into Cuba is a long way off from being a profitable one. After half a century of economic isolation from the West, the island nation is among the least connected countries on earth. According to World Bank estimates, just 5 percent of residents have access to an Internet connection strong enough to stream video.

Furthermore, $8 a month is a steep price to pay in a country where the average monthly wage is $20, according to NBC News. But the announcement is in step with Netflix’s ambitious global expansion plan, which takes it into countries that are still developing the economy and infrastructure to support it.

Netflix launched in Latin America in 2011 and now has more than 5 million subscribers in the region. The company now has a presence in 50 countries, and hopes to increase that to 200 by the end of 2016 with a major push into Asia and certain parts of Africa. It’s also heavily invested in developing original programming with broader global appeal, including the $90 million “Marco Polo,” and “Marseille,” a French political drama. In the short term, such efforts appear to be working – Netflix’s international revenue jumped 85 percent in a year’s time, according to a fall 2014 earnings report.

The US still accounts for two-thirds of the company’s business, but Netflix is adding domestic subscribers more slowly as room for expansion dwindles. The company would like to hit 60 million to 90 million domestic subscribers, but analysts think that could be difficult. “Few paid services have been that successful getting past 30 to 40 percent penetration,” in the United States, analyst Ross Gerber told Bloomberg recently.

Global expansion, then, is key to Netflix’s long-term growth. But whether Cuba could eventually be a thriving market for streaming subscriptions remains a big question mark. The country’s government still controls the potential market for Internet services, and it charges prohibitive fees for its access, leading some citizens to build their own underground network. But eased economic relations with the US , plus the potential for other companies to follow Netflix’s lead, are probably a good start. 

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