Netflix Starting Slow in China
But, Netflix already streams videos in China. Not all of it, but in a few important hot spots. Could these early entries make a difference to Netflix’s strategy in mainland China? The ‘hot spots’ being talked about are Taiwan, Hong Kong, and Macau. All three of these territories operate under the wing of the Chinese government, and Netflix offers streaming services there today. And if you’re looking to start a fight, you can go on the streets in any of these places. Then, you can claim that you’re walking in China — and that you aren’t. Either statement should work, since there are fierce supporters on both sides.
As per the unofficial Netflix online Global Search service, Netflix does have a catalog here. It offers nearly 800 movies and 300 TV shows in each of these territories. It’s not an overly impressive haul, ranking below low-key markets such as Greenland, Antarctica, and Vatican City. The catalogs also stand far behind nearby Japan’s 2,850 titles. And of course, there are the 5,250 movies and shows Netflix streams in the domestic market.
Still, it’s a start. For one, Chinese consumers with friends and family in Hong Kong or Taiwan could cross those familiar borders. They can then get hooked on Netflix services. Grassroots pressure from these users might not make much of a difference. But things can change if a few high-placed Chinese politicians are among them. Or, why not sign up for a Netflix account in Hong Kong or Macau? Then it may be possible to connect to that service across the Great Firewall, or no?
Netflix will Need to Play Chinese Checkers
Sadly, it’s not that easy. Sure, plenty of people cross the Hong Kong border very often — some on a daily basis, even. Hong Kong is a relatively easy two-hour drive from tech manufacturing center Shenzhen. Just across the Zhujiang River, you’ll find casino paradise Macau. Taiwan is far larger than the other two special cases and even more difficult to pin down. The island is technically under Chinese rule, but there’s also a local government in place. In a recent poll, about 5% of Taiwanese adults wanted to unify the island with mainland China. About 19% would have preferred complete independence. But 64% were satisfied with the unresolved tension between these extremes.
Altogether, there are roughly 30mn people in a seemingly permanent limbo between independence and full-blown Chinese citizenship. They are separate enough to keep their own unique currencies. In fact, crossing the borders to or from China adds a stamp to your passport. Crucially, China does not hold absolute power over any of these in-betweeners. The Chinese government keeps an iron thumb on media broadcasting in the country. It practices heavy censorship and tight controls on who can do business in that sector. Those rules do not apply in Taiwan, Macau, or Hong Kong.
Netflix Needs Law Changes in China
Broadcasters sometimes self-censor their own materials to Chinese standards, especially if they also do business on the mainland. But that’s not an official policy and is entirely voluntary. Thus, starting a movie service in Macau or Taiwan is a low-hanging fruit. But it is a million miles away from doing the same thing in Beijing or Shanghai. In order to open up the Chinese market, Netflix, Inc. must try to change the Middle Kingdom’s media laws. Or, it should find a local partner that already runs a media service under the current rules. The first route looks incredibly difficult. Other western media giants have already been blocked or forced out by China’s strict media and business regimes.
Even the middle ground seems tough. China is cracking down on technical measures to get around its Internet restrictions. This makes it harder to access services with geographical limitations –such as Netflix video streams. So, jumping over the Great Firewall to a Netflix account in Taiwan or Macau is more difficult than ever before. The end result will most likely be a heavily censored Netflix catalog in China. The firm will share the local profits with its chosen ally. Together, these two (or more) firms will weave their way through labyrinthine laws and regulations. Probably they will spark a few scandals along the way.
The road into China is not easy, even with a foothold in several Chinese outposts. In the meantime, Netflix, Inc. investors should keep an eye on developments among India’s rising middle class. India has 151 mn broadband users. The firm already runs streaming services there and is already producing an original show in Mumbai.