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Why Netflix’s Move to Enter China Is Both Risky and Relevant

Netflix Inc. Illustrations Ahead Of Earnings FiguresNetflix Inc. Illustrations Ahead Of Earnings Figures
The Netflix Inc. logo and website are displayed on laptop computers for a photograph in Washington, D.C., U.S., on Tuesday, April 14, 2015. Bloomberg Bloomberg via Getty Images

The trade publication Variety is reporting that after a couple of years of failed attempts Netflix is entering the China market.

This is a big deal, for multiple reasons. First, when Netflix (NFLX) recently announced a 130-country expansion, China wasn’t one of them. The world’s most populous nation and second largest economy is a notoriously complicated market for non-Chinese companies. It’s exponentially more difficult for media and entertainment companies, given China’s desire to control the content its consumers see and also to promote local players.

Netflix’s move, about which it disclosed few details, also is notable for its partner. The Silicon Valley company will enter China with a Chinese streaming service called iQiyi, a unit of struggling search engine giant Baidu. The Wall Street Journal reports that Netflix had tried going to China with Wasu Media Holding, an online consortium in which Alibaba’s Jack Ma is a member.

From the outside looking in, China is a massive and poorly understood market. From the inside looking out, China has developed into a mature economy with its own complex fiefdoms, alliances, and relationships. Giants like Tencent, Alibaba, and Baidu are posturing on every conceivable product, from self-driving cars to e-commerce to entertainment—just as their U.S. and European counterparts do in the west.

What fun.


Staying with the China theme, file the following in the category of: “Oh, how the times change …”

The World Economic Forum has announced its co-chairs for its annual “summer Davos,” otherwise known as the New Champions meeting, held this year in Dalian, China. One is Jean Liu, president of Chinese ride-hailing leader Didi Chuxing. At last summer’s New Champions meeting, one of the co-chairs was Travis Kalanick, CEO of Uber, which exited China shortly after the meeting. Talk about complicated.