Alibaba is blocking Netflix from entering China
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June 17, For Netflix, if the streaming video service provider still plans to enter the Chinese market, the difficulty may be greater than previously expected. Alibaba Group (NYSE: BABA) plans to launch a Netflix-like video streaming service within two months, which could kill Netflix's plans to enter the Chinese market, according to a research report released by research firm Zacks Equity Research. Netflix shares fell on Monday on the news as investors worried that the company may be acting too late in developing a strategy for the Chinese market. Netflix CEO Reed Hastings has previously said that the company knows the best approach for most of the countries it plans to enter, but for the Chinese market, the company has been exploring various options. Alibaba Group has a strong position in many industries in China and has a much deeper understanding of the consumers it targets. Another fact is that there are already other local companies engaged in streaming video services in the Chinese market, such as Baidu (NASDAQ: BIDU ), Tencent (HKSE: 0700) and Sohu (NASDAQ: SOHU ), so Netflix's desire to enter the Chinese market is becoming increasingly difficult to achieve. "It's not the same as a French company launching a service in China," said Laura Martin, an analyst at Needham & Company. "Alibaba is a Chinese company, which could put more pressure on Netflix on pricing, or the company could even decide not to enter the Chinese market." Netflix declined to comment on what Alibaba's plans mean for the company. Martin raised her price target for Netflix shares to $780 in a research note on Tuesday, about 17% above its current share price. She said she didn't factor in a potential move into China in her outlook for the streaming video giant because it's a difficult market to crack. However, Alibaba's decision to enter the streaming video market shouldn't affect Netflix's expansion in Europe. Netflix added 2.6 million international subscribers in the last quarter, and now has operations in the UK, Ireland, the Netherlands and the Nordic countries. Outside Europe, Netflix has subscribers in Canada and Latin America, and recently launched its services in markets such as Cuba, Australia and New Zealand. Last year, Netflix's international revenue reached $1.3 billion. That's up from $712 million in 2013, and it's only expected to grow, according to data from financial information provider FactSet. Analysts on average expect Netflix's international streaming video service revenue to reach $1.9 billion in fiscal 2015 and $3 billion in fiscal 2016, according to FactSet. "For offshore markets, we believe Netflix's profits from international users will grow two to three times faster than in the U.S., which means higher returns on invested capital and therefore higher lifetime value per user than in the U.S.," Martin wrote in his research report. "Buying content globally should create higher barriers to entry or bring in low-cost peer competitors." Needham predicts that one day in the future, Netflix will add advertising to its product, creating another revenue stream. So far this year, Netflix's stock price has risen 95%, far outperforming the S&P 500, which has risen only 1.8% over the same period.As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity. |
>>: Can the dream of establishing a TV cinema chain by joining hands with Alibaba Gehua come true?
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