Blockbuster retreated to Mexico, and now Netflix plans to track it down and kill it there

Looking at you, Mexico.
Looking at you, Mexico.
Image: Reuters/Mario Anzuoni
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Blockbuster may have shuttered most of its stores in the United States, but the video rental chain is still alive and kicking in Mexico. Perhaps not for long.

Netflix, which was partially responsible for Blockbuster’s demise in the US, has now outlined an aggressive plan to extends its reach in Mexico. If successful, Netflix could steal most of Blockbuster’s clientele. And after Mexico, Blockbuster doesn’t really have anywhere else to go.

Blockbuster has enjoyed a second life in Mexico due in part to the country’s relative lack of internet connectivity. Only 31% of Mexican households have internet, which makes purchasing physical DVDs and video games more attractive. And unlike the US, Mexico doesn’t have any Redbox kiosks to compete for in-person purchases.

Netflix’s plan of attack in Mexico is based on three ideas: introduce in-store gift cards, invest in ads specifically targeting Mexicans, and highlight Netflix’s functionality on smart TVs.

Gift cards

The gift cards will be available in select stores in the US, Canada, Germany, and Mexico. “In mature markets, gift cards will extend our brand presence and make it easier to access Netflix,” the company said in its letter to shareholderes (pdf). ”In newer markets, gift cards help build the brand and provide an easier alternative for consumers to join Netflix in markets with developing online payments.”

These “newer markets” seem to be singling out Mexico specifically, as the other three markets are not new. Netflix could be trying to capitalize on in-person purchases that currently help Blockbuster to thrive in Mexico.

Ad campaigns

Netflix’s “Viva Netflix” campaign has already spawned two popular ads, one riffing off Alfred Hitchcock’s Psycho and the other featuring Mexican striker Oribe Peralta, which ran right after the country’s World Cup exit.

It’s a good bet that there will be more ads like these in the months to come.

Smart TVs

Netflix says it benefited from people buying new television sets to watch the World Cup, which was popular in Mexico:

Post World Cup, the number of Smart TVs used for Netflix viewing in Latin American countries is at a new high; in fact, the percentage of viewing from Smart TVs in Latin America is higher than any other region we serve. Members accessing Netflix on a big screen generally watch more and retain better than members using smaller devices.

Smart TVs are not any better than normal TVs when you’re just playing a DVD you bought at the local video store. But hooked up to the internet, these sets become a lot more popular. Netflix knows that Blockbuster can’t compete in that arena.

Check out Glass for more on the future of TV.