What is the netflix of china

Global Strategy Research Paper - Netflix In China

1) You will choose (1) a company who has international business or does not in the USA.

The company that was chosen was NETFLIX

2) You will choose one foreign country where the chosen company will begin to operate new business, manufacturing facilities, distribution channels, and staffs from local region.

The country that was chosen was CHINA

Under the given conditions, you will develop global strategy for the chosen companies.

1.Introduction: Significance of the plan, its entry to a chosen country, and its potential to company

2.Market analysis: Political, economic, social, legal, cultural business environment scanning

3.Corporate strategy: recommendation to companies with convincing data and sources

4.Business strategy: recommendation to companies with convincing data and sources

5.Implementation: Detailed action plans with time line, budgets, and staffs

Political | Economic | Legal Environment of China

· Check Currency of China

· GDP of China

· IBP (purchase power of china)

· Growing population

· Socialism?

· Communism?

· HDI (Human develop index): it measures people health care and longetivity, education

· Legal Environment: Is it Civil Law or Common Law, PS: China has a completely different system of law

· Porter’s Diamond of National Competitiveness

Strategy Fundamentals & Corporate Strategy

· What are the strategy fundamentals:

· What Corporate Strategy Netflix uses with other countries and what would be good to use in China.

In the cut-throat race to dominate people’s screen time, western tech giants are all making original content and shows -- the key to rapid growth by video-streaming services like Netflix as users sign up to watch their exclusive content.

In China, meanwhile, where none of these major video platforms is readily available due to strict censorship, a fiercer competition is underway. Local companies are similarly spending billions vying for a bigger slice of the country’s fast-growing online video market by developing their own original programs. With this sense of exclusivity, they are seeking more paid subscribers, with more people now prepared to pay for content in a market that has previously been dominated by rampant piracy. According to research firm IHS Markit, video streaming in China will more than quadruple from $3.5 billion in 2015, to $17.6 billion in 2020. Membership payment will take up a bigger share of the pie, increasing over 500% to $2.6 billion, with the rest coming from advertising revenue.

Currently leading the charge in China is iQiyi, the online video platform backed by search giant Baidu. The company, which also distributes in China certain Netflix programs such as Black Mirror and Mindhunter as part of a licensing deal signed last year, is behind hit titles like The Rap of China, the country’s first hip-hop music show that had been streamed almost three billion times online as of September last year. iQiyi says its success is in part due to Baidu's expertise in artificial intelligence -- the video platform uses AI-based algorithms to analyze user preferences and then push appropriate content. They now have more than 500 million active users, with 50.8 million fully paid-up subscribers. While free content is still available to those users who don't pay, this excludes exclusive iQiyi productions like The Rap of China.

IPO

Now, iQiyi is seeking to raise up to $1.5 billion in a U.S. IPO, tapping international capital to develop more shows while keeping its dual-class share structure -- an arrangement that gives company executives more voting power than average shareholders but isn’t allowed in Chinese bourses.

Chinese rapper GAI performs on the stage during Jiangsu Television New Year Gala on December 31, 2017 in Guangzhou, China.(Getty Images)

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But iQiyi’s position isn’t unassailable, as Tencent Video and the Alibaba-owned Youku Tudou follow close behind. With their equally powerful backers, both have had successes with in-house productions, allowing Tencent Video to grow its monthly active users to 4.8 million in January and Youku Tudou to 4.2 million in the same period, according to Analysys International, a Beijing-based consultancy. Tencent Video had 43 million paid subscribers as of November, the company said.

Meanwhile, smaller sites have carved out a niche. For example, Bilibili, a video site focusing on streaming animated content and cartoons, is also targeting a U.S. IPO. The company, which has 72 million monthly active users that are mostly in their 20s, is seeking to raise up to $400 million to expand its content offering in China.

“China’s video streaming sites are all going after the Netflix model,” says Zhang Xueru, an analyst at Shanghai-based 86 Research. “A big part of their content strategy is producing original programs, especially when licensing shows from others is getting more and more expensive.”

Not all good news

Despite rapid growth in its number of users, iQiyi's costs are also mounting: It has been in the red since 2010, posting a net loss of $574 million last year, according to its prospectus. Tencent Video and Youtu Tudou also have losses in the same range, Zhang estimates. Though many Chinese users have started to pay for content, they aren’t willing to pay much -- meaning membership subscription isn’t enough to cover production costs for now. According to IHS Markit, Chinese users spend an average of $27 on online video on a yearly basis -- far less than the $123 spent on average by U.S. users. While Netflix charges about $11 for a monthly membership, most Chinese companies ask for just $3, worried that users would be turned away should they demand more.

“I pay for Tencent Video because we don’t have cable TV at home,” Tian Ye, 32, who works for a marketing firm in Beijing, tells Forbes. “Sometimes I pay extra to watch NBA games on Tencent, but I don’t think I will pay more than 100 yuan ($15) a month.”

What’s more, China’s video-streaming services face rising licensing costs, as a big part of their budget still goes to acquiring programs from local and foreign studios. For example, it costs Tencent Video $1.4 million for the exclusive right to stream each episode of Chinese historical drama Ruyi’s Royal Love in the Palace -- which has quickly added up to more than $100 million as the show has more than 70 episodes, according to local media reports.

Still, there is a silver lining. Subscription payment has room to grow as people in remoter parts of the country sign up. Advertisers are also shifting online as video streaming is fast replacing television as China’s prime pastime. According to consultancy eMarketer, digital video ads in China will overtake spendings on traditional TV in three years, reaching $17.6 billion by 2021.

“The shift is already quite prominent,” says Wilson Chow, who leads PricewaterhouseCooper's technology, media and telecommunications practice. “Thanks to emerging technologies, advertisers can actually grab customer data and understand customer needs by advertising online.”

The Alibaba Group Holding Ltd. app icon, center left, and the Youku Tudou Inc. app icon, center right, sit displayed on an Apple Inc. iPhone smart device screen .(Xaume Olleros/Bloomberg)

Chow said new revenue streams will also be opened with the advent of next-generation 5G technology, which promises much faster Internet speeds than current 4G plans. This potentially allows premium offerings like virtual or mixed-reality viewing, as these frontier technologies require a superior connection speed.

However, others are less optimistic. Kia Ling Teoh, an analyst at IHS Markit, said it is hard to say when China’s video-streaming sites will be profitable. 86 Research’s Zhang says this won’t happen until the market consolidates further. Right now, it looks like Alibaba’s Youku Tudou is being slowly marginalized, as the e-commerce giant experiments with other ways to keep shoppers hooked. When it took over Youku Tudou in 2015, Alibaba had plans to connect Youku’s audience with its shopping sites by embedding purchasing links in its online programs. Now, the company is directly incorporating fashion video streams into its apps, increasing people's chance of placing purchases by keeping them longer inside the Taobao bazaar and Tmall site.

“If Youku Tudou doesn’t have as much synergy with Alibaba’s core business then it will get less in budget,” Zhang says. “This will affect content plans a lot.”