“Disney, which is very good in China, had their movie service shutdown. Apple, which is very good in China, had their movie service closed down. It doesn’t look good.”
– Reed Hastings, Netflix CEO
Netflix Looks to China
At The New Yorker’s TechFest event last Friday the CEO of Netflix addressed the China question in stark terms, by stating Netflix’s chance to break into China, “doesn’t look good.”
Netflix has been touting their expansion into 130 additional markets in January 2016. While this news is impressive, it does not move the needle much in terms of overall subscribers.
The streaming giant has been available in Latin America most of Northern Europe since 2012. Netflix started offering their service in France, Germany, Italy, and smaller EU markets over a year ago, where they faced stiff local competition and weaker demand than they expected.
The latest European subscriber data suggests that growth as slowed and is starting to level off. Netflix has already reached near-saturation levels in North America.
China was Netflix’s shot at unlimited growth, but it appears greener online pastures are for local companies only.
DisneyLife Sent Packing
Chinese authorities recently shuttered DisneyLife, Disney’s first foray into the SVOD market with their local partner Alibaba.
Although there was no official reason for the suspension, it is relevant that the DisneyLife service tried to skirt around the 70% local content rule.
Local firms have been able to circumvent this rule in some instances, such as Tencent’s Hollywood VIP streaming service, but different rules are applied to foreign firms.
If Disney was not able to bend the rules after having just built a theme park in Shanghai and by being Hollywood’s most successful studio on the mainland, then no foreign firms stand a chance.
Is Netflix a Takeover Target?
After acquiring the cash cow that is Star Wars, Disney has money to burn and is supposedly on the acquisition path.
MartketWatch broke news on Monday, October 4th that Netflix was in Disney’s little black book. The speculation was enough to send the stock traders in a whirlwind as the price rose 4% within an hour. This happened only days after rumors broke about Disney looking to acquire Twitter.
Market Giveth, Market Taketh
The news of a possible Disney’s takeover subsided as the week progressed. However, on Friday at the same event where Hastings called out the theaters for a lack of innovation, he said Netflix’s likelihood of launching in China “doesn’t look good.”
The stock traders were all riled up again. Only this time Netflix shares fell as much as 5% before the weekend.
Hastings concluded is remarks on China by saying, “Disney, which is very good in China, had their movie service shutdown [DisneyLife]. Apple, which is very good in China, had their movie service closed down. It doesn’t look good.”