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Netflix, Inc. (NFLX) Jittery as Chinese Rival Debuts in the U.S. Market

Netflix Inc (NASDAQ:NFLX)

Netflix, Inc. seats in a vantage position in the U.S. on-demand video streaming market; however, its days as the top dog might be numbered. The firm enjoys a strong lead over Hulu Plus, Amazon Video, HBO Now, and Showtime. In fact, Reed Hastings’ firm controls a 36% market share while Amazon and Hulu have market shares of 13% and 6.5% respectively. However, the Netflix of china is ready to set-up shop in the United States and the firm has what it takes to fight for a significant market share.

Netflix Inc (NASDAQ:NFLX)

USA Today reports that China’s LeEco has acquired U.S. Vizio in a $2B deal. LeEco is a Chinese firm that makes TVs, electric cars, and Smartphones and it owns an on-demand video streaming service called LeTV. Vizio is a Southern California firm that sells TVs – the firm controls about 20% of the U.S. market.  A cursory glance at the acquisition LeEco’s purchase of Vizio shows that LeEco bought Vizio in order to pave a way to LeTV to enter the U.S. market.

Challenging Netflix on its turf

Without much ado, Netflix is secure in its lead in the U.S. on-demand video streaming market; hence, the arrival of LeTV in the U.S market shouldn’t cause CEO Reed Hastings or his investors to lose sleep. However, JD Howard, an exec at LeTV says they are coming to fight for market share and “we’re going to be building a big presence here.”It might interest you to know that LeTV has experience in the on-demand video streaming market – at least it has experience running the business in China.

Many people think that LeTV is the Chinese version of Netflix. Mark Li, an exec at LeTV disagrees and he submits that Netflix is the LeTV of the United States. Mark Li has compelling facts to support his thesis – to start with, LeTV has been running a video streaming service in China for 3 years before Netflix began its operation in the U.S. More so, LeTV had produced its original content before Reed Hastings created the House of Cards series.

LeTV has a good strategy in place

Another important factor that could help LeTV get a foothold in the U.S. video streaming market is  the sales of TVs. The parent company of LeTV makes TVs, Vizio that was just acquired sell TVs in the United States. LeEco only needs to preinstall its LeTV app on TVs sold in the U.S. and it would only need to come up with an ingenious marketing campaign to get people to try out the LeTV app on their new TVs.

In contrast, Netflix doesn’t have an hardware business and it would need to navigate a complex world on negotiations to have its Netflix app preinstalled on TVs.  More so, LeEco produces settop boxes and smartphones.  Granted, LeEco doesn’t sell the devices in the U.S. yet; nonetheless, it could replicate the hardware-software mix that has proved successful in China. inston Cheng, Leeco’s global head of corporate finance and development observes that “our strategy is to integrate our platform—including software and services—with devices.”

Nonetheless, LeTV is not depending on its software-hardware strategy alone to take over the U.S. market from Netflix. Rather, the firm is targeting its marketing efforts at U.S Chinese speakers who would have sentimental reasons to patronize the service. Once LeTV has build a strong following among the Chinese audience in the U.S, the firm would find it much easier to launch out into the wider U.S. market.

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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