Netflix Inc. (NASDAQ:NFLX) is has reported that it has reached an agreement with the Chinese government to carry out operations in the country.
Expansion goals for the company
The company is having negotiations with iQiyi, a Chinese live video streaming platform which is a subsidiary of Baidu. Baidu which is the most popular search engine in China and has been expanding into diverse environments including self driving cars as well as entertainment. The companies did not disclose the terms of the deal which was first announced by Variety.
“Netflix has been aggressively pursuing international expansion as its core U.S. market matures” indicates the report. The producer of shows such as ‘House of Cards’ as well as ‘Orange Is the New Black’ hopes to have new subscribers signing in fast enough in order to offset the escalating content costs. This is as the company continues to invest in original programming that has a probability of having a global appeal.
Why China?
China is termed as the market’s Holy Grail due to its increasing incomes and the expanding online entertainment pool of customers. In 2016, China had recorded about 75 million paid subscribers to the online video content. In 2015 the number was more than triple at 22 million as indicated by a EntGroup, a Beijing based research group.
China presence was notably missing when Netflix was rolling out its expansion about a year ago which involved including 130 nations in its service map. This is probably because China was not an easy market to enter as the authorities censors often block scenes that appear to them as objectionable. They have therefore demanded increased control of the imported internet material in recent years.
Entry into the Chinese market
Netflix has sought a local partner from China for more than two years. The company has engaged in talks with a couple of China’s popular state-backed broadcast firms which include Wasu Media Holding Co. an online media firm that is backed by an alliance including Alibaba Group Holding Ltd (NYSE:BABA) executive chairman, Jack Ma.
The first two seasons of the “House of Cards’ were a hit in the Chinese market. They comprised an original series by Netflix and starring Kevin Spacey as scheming a U.S. politician, Frank Underwood.
The stock of Netflix closed at $152.16 on Tuesday after a rise $8.33 or 5.79%.
