The shares of Netflix, Inc. (NASDAQ:NFLX) soared in excess of 17 percent after announcing its fourth quarter 2014 financial results. However, its quarterly results indicated a slacking subscriber growth in the United States, although the company is profitable in 40 out of its existing 50 global markets. The video-streaming service has its eyes set on the largest internet market of the world, China, but aims a smaller service unit initially.
China has surprised several companies in the past and majority of the social media networks are banned in the country including YouTube, Gmail, Twitter Inc (NYSE:TWTR), and even Facebook Inc (NASDAQ:FB). Reed Hastings, CEO of Netflix, Inc. (NASDAQ:NFLX), said that the company has a plan for all of its 200 target countries except China.
In the first few years, the video streaming service would offer its original series along with licensed content and comparatively smaller set of services. Hastings further added that the company would focus on gaining relevant permissions and understand the market during its initial years.
Getting appropriate licenses is not the only challenge in front of Netflix, Inc. (NASDAQ:NFLX) in China because the local video streaming industry thrives on advertising revenue instead of subscription packages. As of now, subscription models are non-existent in the country.
At the same time, Chinese authorities pose a great concern in front of all the major foreign media providers. The authorities have introduced quota restrictions and licensing requirements favoring the domestic digital content providers. In addition to it, the authorities hold the right to remove any content that is considers being harmful for its citizen.
On top of it, Netflix, Inc. (NASDAQ:NFLX)’s television series “House of Cards” received up to 8.2 million average streamed views for every single episode, which is quite small considering the huge Chinese audience. While talking about this move from Netflix, some analysts said that the company is following the current technology trend of entering the Chinese market because of its large audience with little attention to the obscure operating challenges.
This article has been written by Prakash Pandey.