Netflix’s growth prospects in China could be slowed as a result of Walt Disney’s latest deal with Alibaba, says a report from The Street. With this deal, the media company has a chance to offer Disney content to viewers via an over-the-top streaming service.

Disney, Alibaba Group Holding Ltd Deal Should Worry Netflix, Inc. Investors

Disney ditches Netflix for Alibaba

Netflix investors feared that this would happen, and their fear seems valid. This bad news for the streaming firm comes as welcome news for shorts-sellers. Ovadia Ovi Levy of KPL Capital, who is short Netflix, believes that if the company fails to grow in China, then it will be a bad omen for its growth opportunities.

Earlier this week, Levy said, “Outside of the blockbusters, American content does not travel well. Cultures like to see their own faces on screen, their own values.”

China has a well-established production infrastructure of its own that makes plenty of Chinese films with Chinese characters and content, Levy added. About four years ago, Netflix signed an exclusive U.S. deal for Disney movies. Yet Disney did not offer Netflix its content for China and instead partnered with Alibaba. Both Disney and Alibaba are global brand names, and the Mickey Mouse-themed set-top device will probably be a big hit there. Disney can benefit by getting a share of both hardware revenue and annual subscription revenue directly from Chinese viewers, and it could be higher than the licensee fee from Netflix.

Why the Disney device could be a hit

Levy added that China has a cable TV monopoly that partnered with Alibaba and other state-owned media companies for streaming video. And Alibaba with its deal with Disney could make things even more difficult for Netflix in China. Apart from offering streaming service, Disney’s device also offers other functionalities, and this could make it a hit. The device is called DisneyLife and can be purchased through Alibaba’s website. The device is priced at $125 and can act as a one-stop shop for all things Disney, including tickets to the company’s theme parks as well.

At 10:30 a.m. Eastern, Netflix shares were down 2.03% at $120.02. Year to date, the stock is up 146%, while in the last one month, it is down by almost 1%. Walt Disney shares were down 2.76% at 10:30 a.m. Eastern.