I use Hulu Free. Don't mind the ads. It's a great service.
Hulu Plus doubled their subscription count from 1.5 million in 2011 to 3 million in 2012. Total revenues of $700 million are comprised of approx. $300 from subscribers, $400 from advertisers.
That growth didn't come cheap. They spent $500 million for content licenses in 2012.
Netflix is spending about $2 billion a year for content. That's to service 29 million streaming subscribers, and to add 5 million streaming customers domestically and another 3 million internationally.
You can easily see the benefits of scale.
I think the Hulu business model could work for Netflix in Latin America if they continue to run into trouble verifying credit card. Hulu increased the number advertisers by 28% year over year. A very valid business model.
I agree 100% about switching to an ad-supported methodology as a fallback plan. Advertising revenue quickly exceeds 8$\month given the # of hours people watch. So if you can't manage to get a real credit card, or are otherwise willing to stare at ads to save a couple bucks. Have at it. I would design it so that you choose between free or paid, and when you cancel you really just drop down to the ad-supported version. Not sure how that plays with licensing though.
International gives them the opportunity to test such a thing without excessively damaging their brand elsewhere. 'Oh this is just an idea we had that's particular to Uruguay's particular economics.'