January 15, 2016
Netflix and Amazon are currently small players in the content business compared to Disney, Comcast and Time Warner. And although there are plenty of reasons why these media behemoths need not be too concerned about Netflix and Amazon, these two streaming services do continue to grow and succeed. Most recently, Netflix’s stock rose 140 percent, making it the best performing of Standard & Poor’s 500-stock index, and the company announced at CES that it will make its content available worldwide (except for China).
Wired notes that Netflix may never break into China. Although the second season of “House of Cards” quickly became the No. 1 U.S. streaming show on China’s Sohu network, entering the Chinese market — much less succeeding — will “not be an easy feat.”
“China is a market all its own, and Netflix will have to play by Chinese rules,” says Wired. “But it’s not clear that even then Netflix will have a real chance.”
University of Virginia media studies professor Aynne Kokas reports that every foreign TV show is first viewed and censored by officials, and violence, sex and nudity are usually blocked. Laws also require streaming services to limit their foreign-made content to no more than 30 percent. Widespread piracy is another obstacle.
Even without China, however, making its content available globally will nearly double Netflix’s potential market to more than 540 million households with broadband, reports The New York Times.
“On paper, [Netflix co-founder/chief executive Reed] Hasting’s plan to take on the traditional TV industry has long sounded slightly nutty, as delusional as Jeff Bezos’s strategy at Amazon to overrun retailing once seemed,” says NYT, comparing Netflix’s strategy in media to Amazon’s rise in e-sales.
Netflix’s investors are giving the company free rein to “spend huge sums to build a globe-spanning video jukebox available to anyone” as well as lots of critically acclaimed original content. Similar to Amazon, Netflix is also collecting lots of data on what viewers want, to create widely appealing content.
Already, viewers streamed 12 billion hours of Netflix in the last quarter of 2015, which equates to 14 cents per hour, says MKM Partners analyst Rob Sanderson. “Cable is between 25 and 30 cents an hour — so Netflix is basically half,” he says. “If you look at the dollars per hour of Netflix, there’s nothing even close.”