Netflix (NFLX) in Talks to Enter Chinese Online Video Market

Shares of Netflix Inc. (NFLX) were trading up +13.70 or +2.33 percent to $600.55 per share in Friday's premarket trading after news broke late yesterday that the company is in talks with possible partners to enter the online video market in China. Netflix stock closed at $586.85 per share, up +6.74 or +1.16 percent in Thursday's regular trading session.

Los Gatos, California based Netflix Inc. was founded in 1997 and is an Internet subscription service offering subscribers unlimited streaming television shows and movies that can be watched on television sets, computers or on mobile devices.
The company currently operates in North and South America, the United Kingdom, the Caribbean, Scandinavia, the Netherlands, and Iceland. Netflix has expanded its subscription base to over 62 million users worldwide in the company's first quarter of 2015, offering its service in more than 40 countries.

According to sources familiar with the matter, Netflix is currently in talks with Jack Ma backed Wasu Media Holding Company and other possible partners to enter China's $5.9 billion online video market. Netflix is looking for a partner that already has Chinese licenses to broadcast content on devices, including cell phones, computers and set top boxes.

Wasu Media, a company already operating extensively in Chinese media could be an ideal candidate and has already been in talks with Netflix. In April, Wasu Media announced that Alibaba Group founder, Jack Ma and other partners would pay $1.05 billion for a 20 percent stake in Wasu. Another possible candidate is BesTV News Media Company, based in Shanghai.

During a three day summit held by the Cannes Film Festival to aid film professional in the Chinese market, Ted Sarandos, Chief Content Officer for Netflix said last Friday that, "China is too big to have an asterisk next to it, there are a lot of operating constraints in China that are different to anywhere else. We don't have any operating partners anywhere else in the world, so that would be a new skill for us too. Sarandos continues saying that, "We are also aware that there are unique operating models we've not worked in before, we've not acquired companies, we've not worked with partners before in any of our territories, but if that's the cost of doing business in China we will figure that out .

Netflix's original series "House of Cards starring Kevin Spacey is already popular in China. Nevertheless, Netflix will have a series of hurdles to clear with Chinese regulators before it can gain a significant foothold in the Chinese market. The series, which has played for the last two seasons on Chinese video streaming site Due to new Chinese restrictions the third season will not air until the full season is reviewed by regulators, which has caused the series' third season to be the most pirated TV show in China.

According to a Wasu executive, the company has held several talks with Netflix since February; however, he said that, "We are still taking time to know each other better because America's content industry is very different from China's . Netflix stock is reflecting the approval of shareholders and investors in this morning's premarket.

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Published on May 15, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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