Sep 24, 2020
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Netflix To China: Let’s Partner Up And Make Money

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What a difference two months makes. In March Ted Sarandos Netflix chief content office was telling the media in Shanghai that Netflix was ready to break into China – but not with a Chinese partner. Joint ventures are not exactly Netflix s style. Back then Sarandos noted that such partnerships may well be difficult to manage


Yet China has its own way of doing things. Western companies entering China tend to want to or have got to enter into joint ventures with local firms with the intention to navigate the guidelines and access favorable government treatment. Enter Netflix – the binge-watching video-streaming king of the area at the moment or at least the area outside China


The Chinese seem like starving for Western content in an unprecedented and accelerating way. CANNES FRANCE – MAY 15: Netflix Chief Content Officer Ted Sarandos (L) gives a talk at Marche Du. [+] The Chinese box office has leapt to the number two position globally for US films in terms of gross revenues


This is set to overtake the United States in this regard imminently. Just this week Avengers: Age of Ultron posted the finest opening of any US movie – ever – in China. Netflix may have realized that partnerships with Chinese firms are a necessity. Movie studios must work with two state-owned distributors China Film Group Corp


and Huaxia Film Distribution Co. Local partners make red tape much easier to deal with. Netflix would have had to get eight different licenses to stream in China a complicated barrier to entry. Without a Chinese partnership that road would were rough. PROMOTED Grads of Life BRANDVOICE | Paid Program
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For movies that number is capped at 34 though film companies like Walt Disney (parent of Marvel Entertainment) and others are looking for to raise that limit. In addition there are censorship and related editing issues. Domestic TV streaming sites in China have caps on foreign TV content. For 2015 the variety of foreign shows on Chinese video streaming sites were limited to 30 percent of the Chinese shows broadcast in 2014


If Netflix partners with a Chinese film company at the content side it might help in getting around that limitation. Netflix could stream the Chinese House of Cards but also maybe the House of Shanghai Cards? It s not outside the area of possibility. There are two key elements of media success in China


The 1st is in the film industry. American blockbusters only enhance their box office bank by screening in China. Increasingly a larger part of Hollywood earnings are coming from and could keep coming from China. It s only logical for Netflix to want to access those particular consumers of content


Reports today first broken by Bloomberg indicated there were discussions between Netflix and two Chinese companies: Wasu Media Holding backed by Alibaba s Jack Ma and BesTV New Media Co. These two are no slouches with respect to understanding the financial benefits of global partnerships. We would like to cooperate with Netflix considering its global influence Xu Feng vice president of Shanghai-based BesTV New Media Co


told the Wall Street Journal. Investors sent Netflix fill up 4. 5% to a new high today. That was just at the news that Netflix CEO Reed Hastings was in talks not even that the ink has dried on a manage a Chinese partner. There is another wrinkle. In China the assumption of deciding to buy streaming has not evolved


That said consumers there are happy to pay for film tickets to Hollywood hits (albeit at lower comparative prices than US moviegoers pay. ) Netflix bets they will be equally happy to pay to binge on their original (and second-hand) streamed content. Netflix shares have shot up 75 percent this year. They closed today at $613


25. If Netflix pens a manage a Chinese partner judging from the percentage of revenues the Hollywood movie studies are making from China and considering the more complicated editing and censorship issues the firm is looking at a likely 10-15% revenue hike from the venture. This is a further game changer for Netflix in the competitive global streaming marketplace

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