There are at least three ways Netflix (Nasdaq: NFLX) can win in China. And they are realistic options that have worked for others.
But first, a few points about the situation in Chinese online streaming.
Point 1: The China entertainment market is rocketing upwards, and it will soon be the largest in the world. This huge opportunity is fueling a major fight between China’s cash-rich Internet and media giants. This hyper-competition is also creating a window of opportunity for Netflix because it has valuable things to offer to these competitors as they slug it out.
Point 2: Online media in China is very political and likely no foreign company will have control of a license or broadcast rights. So Netflix needs to be realistic about what is possible.
Point 3: The other big issue is the strong local competition. If Netflix wants to win in online streaming in China, they need to be prepared to fight for a long time.
Bottom line: Weibo’s elimination of the 140-character length limit for posts looks like a good strategic decision, as it consolidates its position as an alternative news source to traditional state-owned media.
Weibo lifts length limit for posts
Social networking (SNS) leader Weibo (Nasdaq: WB) is taking a radical new step and dropping the rule that strictly limits the length of microblog posts, in its bid to remain relevant and avoid being marginalized by dominant rival WeChat. The move is quite bold on the one hand, but also probably long overdue, in a world where people have many SNS options that provide more flexibility in the kinds of information and messages they share online.
The decision looks broadly positive for Weibo, which has evolved into an informal news source for many of its 200 million users. The company operates a service nearly identical to American SNS pioneer Twitter (NYSE: TWTR), and rapidly rose to become the clear leader in the space after Twitter itself was blocked in China in 2009. Read Full Post…
Bottom line: A sudden spate of new mega-fundings by Meituan-Dianping, Lufax and JD Finance show there is still big interest in China’s private tech and finance sectors, despite the nation’s rapidly slowing economy.
Investors throw billions at Meituan-Dianping, Lufax, JD Finance
It seems I may have been a bit premature with my recent prediction that the mega-fundings that crested in China a year ago were finished. That’s my assessment after reading about 3 new mega-deals in the tech sector this week, all worth more than $1 billion. Leading the pack was recently merged group buying giant Meituan-Dianping, whose whopping $3.3 billion in new funding values the company at $18 billion.
That latest news came just a day after media reported another deal that saw peer-to-peer (P2P) lending giant Lufax just raise its own new funding of $1.2 billion, valuing the firm at $18.5 billion. Last but not least was announcement at the start of the week that the finance unit of e-commerce giant JD.com (Nasdaq: JD) had just raised 6.65 billion yuan, or just over $1 billion, valuing the firm at 46.7 billion yuan ($7 billion). Read Full Post…
Bottom line: Google’s new alliance with Lenovo and its rare response to rumors Chinese media rumors are the latest signals of its plans to launch an app store and sell its Nexus smartphones in China later this year.
Google Tangos with Lenovo
Google (Nasdaq: GOOG) has been in the China headlines twice these last few days, announcing a new tie-up with local PC giant Lenovo (HKEx: 992) and issuing a rare response to the latest rumors on its slow march back to the world’s biggest Internet market. These latest signals seem to show that a return to China is almost inevitable for Google, which wants to avoid a negative publicity backlash that will inevitably come when it announces the move later this year.
Google abruptly shuttered its China search service nearly 6 years ago, after Beijing refused the company’s demands to ease strict Chinese rules that require all Internet sites to self-police themselves for politically sensitive content. The closure and acrimony that followed carried a healthy dose of self-righteousness by Google, and thus a return to a market it once scorned might seem just a tad hypocritical. Read Full Post…
Bottom line: TCL’s smart TV alliance with LeTV brings together 2 strong names and is getting off to a good start with a strong lineup of new products, but could have trouble over the longer term due to the rapidly changing industry.
TCL announces new products with LeTV
TV stalwart TCL (Shenzhen: 000100) has just announced an expansion of its young partnership in smart TVs with industry high-flyer LeTV (Shenzhen: 300104), in what could become the first of an earlier wave of such tie-ups to finally gain some traction. Many of the similar tie-ups were announced in rapid succession a couple of years ago, as newer online video companies rushed to forge partnerships with traditional TV manufacturers.
The idea was that the TV makers would produce customized products optimized to offer video services from a particular Internet company, creating a new generation of online-connected smart TVs that could compete with traditional cable TV services. But it seems many of those alliances never really got very far, and these days many video companies have decided to focus instead on making special set-top boxes that be easily mounted on any TV. Read Full Post…
Bottom line: Sina’s latest board reduction to just 5 members looks like a strategic move by Chairman and CEO Charles Chao, as he prepares a sale that will give him a major executive position at his company post-merger.
Sina board shrinks to just 5 members
The share price isn’t the only thing shrinking these days at leading web portal Sina (Nasdaq: SINA). The board of one of China’s oldest Internet companies has also just undergone a major reduction, with 2 of its 7 members leaving without any sign of replacements. I’m not extremely familiar with Sina’s board and its dynamics, but it does seem like 5 members is quite small for a company of Sina’s size and could reflect a power play by longtime Chairman and CEO Charles Chao.
Such a play could be prelude to the sale of Sina to a rival, with e-commerce giant Alibaba (NYSE: BABA) as the most likely candidate. I’ve been predicting such a sale for a while now, and this latest move looks like the latest signal that Chao could be clearing out board members who might oppose such a deal. With just 5 members left on the board, Chao would only need 2 to agree with him to approve a deal that he would personally negotiate. Read Full Post…
Bottom line: Starbucks and Uber are likely to scale back their latest aggressive China expansion plans as the nation’s economy slows and consumers rein in their spending on non-essential items and services.
Starbucks accelerates China expansion
China’s economy may be heading for a new era of slower growth, but you would never know that by looking at the latest moves by Uber and Starbucks (Nasdaq: SBUX), 2 global leaders in their categories of hired car services and retailing. The first instance has Uber completing a major fund-raising for its China unit and forming a new tie-up in travel services. Meantime, Starbucks is steaming ahead with plans to nearly double its China store count by 2019.
As a neutral observer of both companies, I have to say that both Starbucks and Uber are being just slightly naive in ignoring all the signs of a major Chinese economic slowdown that could ultimately lead to woes now confronting countries like Greece and Spain. In that kind of environment, it’s far from clear that consumers will still enthusiastically shell out $5 for a cup of coffee at Starbucks when they could buy a cup of tea for far less, or that they will pay similar amounts for a hired car instead of taking the bus or subway. Read Full Post…
Bottom line: New scandals involving fraudsters using Baidu and Ctrip platforms highlight a major problem for major web companies from third-party merchants, but are unlikely to have a big impact on their business.
Frausters make headaches for Baidu, Ctrip
Two new scandals involving leading travel services provider Ctrip(Nasdaq: CTRP) and top search engine Baidu (Nasdaq: BIDU) are shining a spotlight on the daily battle China’s top Internet firms must do with the hundreds of fraudsters lurking online. The first case has Baidu dealing with fraudsters who tried to sell products on its Tieba social communities service, while Ctrip has landing in trouble after 2 people bought invalid tickets from independent travel agencies on one of its open marketplaces.
The biggest case for this kind of fraud came a year ago, when China’s commerce regulator released a report showing huge volumes of trafficking in pirated goods on the Taobao marketplace operated by leading e-commerce site Alibaba(NYSE: BABA). In all of these cases the fraud isn’t being directly committed by the big-name companies, but rather by small, third-party merchants doing business on their sites. But the big Internet names are realizing that they are ultimately responsible for the reliability of all transactions taking place on their sites. Read Full Post…
Bottom line: Vipshop shop shares could see some upside if the company improves its public relations and its revenue and profit growth stabilize at current levels.
Vipshop dogged by fake liquor scandal
A scandal involving pirated liquor is cooling down former e-commerce high-flyer Vipshop (NYSE: VIPS), in an episode reminiscent of a much larger brouhaha that devoured sector leader Alibaba (NYSE: BABA) almost exactly a year ago. In this case, the scandal involving fake Moutai liquor has been dragging on for more than 2 weeks now, and the latest development has Vipshop apologizing for its lack of transparency in handling the incident.
Some are saying this particular scandal could just be the tip of the iceberg, and that numerous other fake products could be lurking on Vipshop’s website that specializes in bargains for lesser-known brands. But in my view, slowing growth is the real cause for concern among Vipshop investors, many of whom are taking advantage of this news as an excuse to sell their stock. Read Full Post…
Bottom line: Sina’s new deal to broadcast the video channel of the Manchester United soccer team looks like a good bet, while LeTV’s new deal to broadcast US baseball games is more likely to strike out.
Sina tries soccer with Man United
Leading web portal Sina (Nasdsaq: SINA) and online video giant LeTV (Shenzhen: 300104) have just announced 2 new sporting deals, extending a recent streak of similar investments by media companies in search of exclusive content. The first deal will see Sina become the official broadcaster in China for Britain’s Manchester United soccer club, while the second will see LeTV’s sports division get similar rights for live broadcasts of US Major League Baseball (MLB).
Both moves are really just licensing deals, though each could become an important new revenue source for Sina and LeTV as they search for exclusive content to lure viewers to their services. From a quantity perspective, LeTV is the big winner in this new round of deals since it will gain rights to hundreds of baseball games played in America each year. But Sina is the winner from a quality perspective, since soccer is far more popular in China than baseball, which is relatively unknown among average Chinese. Read Full Post…
Bottom line: The delay in Netflix’s plans to enter China this year may be due to lobbying from domestic online video companies, and it could be several more years before it gets permission to form a China venture.
China absent in major Netflix expansion
Shareholders of US entertainment giant Netflix (Nasdaq: NFLX) will be disappointed to learn that China wasn’t included on the company’s global road map, as it announced a major expansion for its signature online video service. Many believed that an entry to China could come as early as this year, after media reported last spring that Netflix was in talks to set up a Chinese online video joint venture with Wasu Media (Shenzhen: 000156), which is backed by e-commerce giant Alibaba (NYSE: BABA).
But the road into China was never going to be easy for any foreign online video company, due to Beijing’s heavy censorship of the Internet and also its inherent bias against big foreign companies. All that said, Netflix isn’t exactly writing off China completely either, but is simply saying its road into the market may take longer than it previously hoped. Read Full Post…
