Netflix, Inc. Entering Tough Chinese Market Without Local Partners

Netflix, Inc. Entering Tough Chinese Market Without Local Partners
NFLX Photo by Matt Perreault

Netflix plans to enter the tough Chinese market on its own, i.e. without a local partner, according to a report from Reuters. China is the biggest internet market in the world, and entering it could be difficult for Netflix as it is widely known for censorship and strict regulations.

Lucrative, but challenging

Netflix, the US-based online video streaming service provider, is trying to expand globally. Subscriber growth for the streaming company is declining in the U.S., and therefore, in order to garner new subscribers and revenue, they must expand globally, and China is a large potential market. The huge internet-using population of China makes it a lucrative market, but breaking into the market is not easy.

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The entertainment market in China is growing at a fast pace, and many global content firms are vying for a piece of the pie. Foreign firms have not been received well by China, who has blocked all the major services like Google, YouTube, Facebook and Twitter, etc. operating freely.

Why did Netflix not choose a local partner?

Netflix has some phenomenal shows to its credit including the U.S. political thriller House of Cards, and it also wishes to make China-made content available in other parts of the world, Chief Content Officer Ted Sarandos told the reporters on Monday.

Explaining the reason for not choosing a local partner, Sarandos said, “It’s unlikely that we would definitely pursue (a local partner model) as a strategy… These ventures become very complex and very difficult to manage, and ultimately difficult to be successful.”

The fact that the company won’t seek support from any local partners will be a barrier to its entry because now it will be required to secure multiple operating licenses on its own, which could lead to delay. Sarandos said that the company will need at least eight different licenses before it launches in China. He further said that the business in China would clearly be subjected to censorship, and the environment is highly regulated.

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