Last Friday, Alibaba felt the need to formally dispel market rumors it would be investing in Netflix. Such “nothing to see here” announcements are almost as common on the business pages as in the sports pages, and I draw no conclusions about what the two companies may have been planning.
But it did get me thinking about Netflix and China. I see Netflix as a fantastically innovative company that, like Amazon, continually (and usually correctly) anticipates where the market is going. It’s sometimes hard to remember that Netflix began as an upstart rival to Blockbuster Video and that Blockbuster could have purchased Netflix for $50 million in 2000.
Netflix has not entered the Chinese market, though, and unless it changes its business strategy or China changes its approach to regulating content and Internet streaming, it probably will not be doing so soon any time soon. A January piece in Wired suggested if Netflix were willing to spend billions and make concessions to the Chinese government, it might be allowed in, but this misses the point. China is getting more restrictive regarding internet content, not less, and it is simply not possible for a foreign-owned company to do in China what Netflix does in the rest of the world.
The Chinese government has made its longstanding rules prohibiting foreign control of online publishing (including streaming) will be broadly interpreted and strictly enforced. Apple’s iTunes Movies and iBooks Store and a premium Disney streaming channel were yanked offline in April, with no return in sight. And you can find any number of stories about China clamping down on foreign content. As of July 1, China imposed strict regulations on the number of foreign-inspired reality shows on the air. Over the past couple years, scripted television programs ranging from NCIS to The Good Wife to The Big Bang Theory have been taken offline with the flimsiest of rationales. (If you are ever stuck for a conversation topic with a Chinese person under the age of 30, start talking about The Big Bang Theory. It has replaced Friends as the show every college student in China has seen multiple times and uses as a cultural touchstone for understanding America.) And we haven’t even gotten to the new television censorship rules that forbid depictions of (among other things) drinking, smoking, adultery, violence, homosexuality, and the occult.
The only way I can see Netflix entering the Chinese market is with a Chinese partner that takes on full responsibility for the content and the delivery of such content. Which is not much different than just finding a Chinese distributor, as Netflix already does with its original programs like House of Cards.
Netflix can take solace in one thing, however; China’s new rules on foreign television programs require that the government review an entire season before a single episode can be shown online. Looks like everyone’s getting on the binge-watching bandwagon.