Netflix, Inc. (NFLX) Looks for Local Partner For Chinese Market

Netflix Inc (NASDAQ:NFLX)

Netflix, Inc. is looking for ways to enter China, which is a difficult market for foreign companies. The company’s Chief Content Officer Ted Sarandos told the reporters in Seoul that the U.S. streaming giant continues to look into the possibility of entering the Chinese market, Reuters reported. Sarandos believes that the company can break into the complex Chinese market without a local partner.

Netflix Inc (NASDAQ:NFLX)

China – A Great Opportunity

According to report published on Fortune, Sarandos said that Netflix is looking at various investment opportunities in Asia to improve its offerings.

In Asia, the streaming company wants to replicate its success in the United States, Western Europe and Australia. But the streaming giant is struggling in several Asian markets as a result of local competition and regulatory hurdles. There is growing competition in Asia from local streaming sites as well as global providers such as Amazon, Hulu, HBO and BBC iPlayer. In addition to satisfying local authorities, the streaming giant should focus on providing strong content to attract consumers.

Netflix, Inc. had 34.5 million international subscribers and 47 million U.S. subscribers at the end of the quarter. The online streaming service expanded to more than more than 130 new countries including India early this year. It has 81 million customers across 190 countries.

Vivek Couto, executive director of Media Partners Asia, believes that Netflix will be able penetrate in Asia in the coming years. But in the short-term, it is difficult for the company to find success here. Media Partners Asia is a media consulting and research firm with offices in Hong Kong, Singapore and Mumbai.

Couto believes that Netflix will invest in local co-productions in Japan, India, Korea and China over the next 3-5 years. He also predicts that the company will get a “reasonable” penetration in South East Asia. The company’s services aren’t being subject to the normally strict censorship regimes in Singapore and Hong Kong, which gives it an advantage. However, piracy is “massive” in both Singapore and Hong Kong, according to Couto.

Talking to reporters, Sarandos said that China is a great opportunity and the company continues to look into the country.

Why Does Netflix Need a Partner?

According to an article published on Seeking Alpha, a local partner is absolutely necessary for the U.S. streaming company in order to be successful in China.

“The sheer number of licenses and the number of mid-level government officials that a content broadcaster deals with is mind boggling and exhausting. However, the process can be facilitated through a partnership with local players such as a well-known media company that is usually backed by a state-owned enterprise or a local government body,” according to the article.

Netflix is expected to announce its strategy for China in the second half of the year, CNBC reported, citing S&P Global Market Intelligence Analyst Tuna Amobi.

Netflix is also focusing on an original content. As we reported earlier, the company is getting ready to unveil its latest original series “Stranger Things” this summer. Stranger Things, from newcomer writer/director brothers Matt and Ross Duffer, will have eight episodes.

The company recently announced that it will produce an original content for the Indian market. The streaming service’s first production, a crime drama series, is adaptation of the 2006 best-seller “Sacred Games” by Vikram Chandra.

In other news, Netflix, Inc. is facing a class action lawsuit for raising subscription rates in California.

On Friday, Netflix shares surged on a bullish report from Canaccord Genuity, which initiated coverage on the company with a buy rating.

The stock soared 5.67% to $96.67 on the last trading day. Canaccord Analyst Michael Graham assigned a price target of $120 to the stock.

Canaccord recommends investors to buy Netflix on the prospects for large international subscriber gains in the coming years, CNBC reported.

“Our analysis suggests a long runway for international sub growth in Q4 and beyond, and we believe this is the key metric for the stock through next year at least,” Graham wrote in a note to clients.

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