Alibaba To Launch Netflix-Like Movie Streaming Business for China

China's growth has been predicated on its ability to produce tangible products which are of high quality and low price. With the growth of internet service giants like Alibaba and Baidu, it has demonstrated its command of intangible services for the Chinese market. Uber is already facing local competition. With the leap into entertainment, Chinese services are beginning to more directly challenge American companies like Netflix. JL

Josh Horwitz reports in Quartz:

Known as Tmall Box Office, or TBO, the service will offer a mix of third-party and in-house content, as well as domestic and foreign videos About 90% of TBO’s content will be paid for, by subscription or per broadcast. The service will run through Alibaba’s set-top box,
Alibaba already sells millions of televisions every year to Chinese consumers. Now it wants to sell them stuff to watch as well—the company is launching a movie streaming service for its set-top box customers in two months.
Known as Tmall Box Office, or TBO, the service will offer a mix of third-party and in-house content, as well as domestic and foreign videos, Reuters reported June 14. About 90% of TBO’s content will be paid for, either by subscription or per broadcast.
An Alibaba spokeswoman told Quartz the service will run through Alibaba’s set-top box, which gets content from Wasu Media, a film distribution company that Alibaba founder Jack Ma has invested in. Alibaba did not respond to requests for information about set-top box sales, but 176,000 households bought one during last year’s “Single’s Day” alone (link in Chinese).
“Our mission, the mission of all of Alibaba, is to redefine home entertainment,” Alibaba’s head of digital entertainment told Reuters over the weekend. “Our goal is to become like HBO in the United States, to become like Netflix in the United States.”
The deal could be good news for Netflix, which was reportedly in talks with Wasu recently about doing business in China. While it’s likely too late for a “Netflix China” launch, Netflix has recently begun securing the global distribution rights for in-house and third-party titles. The upcoming launch of TBO could pave the way for Netflix’s arrival in China—as a content distributor instead of a consumer-facing brand.
Piracy in China cuts deeply into revenues for movie theaters and content providers alike. But the true hurdle for Alibaba in China’s video streaming market will be the number of competitors already offering premium content, often for free.
Nearly all of China’s Youtube-esque streaming properties have begun paying hundreds of millions of dollars for the right to stream titles like House of Cards or the Walking Dead in China. This not only keeps the US entertainment industry happy, it also helps drive traffic to the sites themselves, which rely on advertising for revenues.
China’s video streaming market remains extremely fragmented—iResearch lists no less than ten serious contenders for eyeballs. Most of these sites offer access to high-budget movies and TV shows for free, though some have subscription services as well.
TBO’s upfront fee-based business model will certainly help distinguish it from its competitors—but may ultimately make it harder for the company to compete.