Blocked by regulators from setting up shop within China's massive entertainment market, Netflix has instead signed a licensing deal with one of its most powerful local counterparts in the country.
The global streaming giant said Tuesday that it has reached a content agreement with Beijing-based video service iQiyi. The deal was revealed Tuesday during the kickoff to APOS, an industry conference held annually in Bali, Indonesia.
"China is an important market for obvious reasons; it's also a challenging market for obvious reasons," said Robert Roy, Netflix's vice president of content acquisition. "Right now what we will do is look to license content into China. We closed a deal with iQiyi, which is exciting."
"For us, it does a couple of things," Roy added. "It gets our content distribution into the territory and builds awareness of the Netflix brand and Netflix content."
Netflix declined to share additional details of the deal, including which Netflix originals will be hitting the China market and when. But it's understood that the service soon will make some Netflix originals available via iQiyi day-and-date with the rest of the world. (iQiyi later said shows included in the deal include are Black Mirror, Stranger Things, Mindhunter, BoJack Horseman and Ultimate Beastmaster.)
When asked by THR if full entry into the China market was something the company was still pursuing, Roy added: "We'd love to have direct relationship in China, and it's just a matter of when and how, and that's something that we're trying to figure out over time."
iQiyi, a subsidiary of Chinese search giant Baidu, began as an advertising-supported video platform, but it is in the process of transitioning to a subscription model similar to Netflix. Video streaming is among the most fiercely contested areas of the Chinese entertainment landscape. iQiyi is believed to have the strongest subscriber base and content portfolio in the market, but its deep-pocketed rivals include Tencent Video and Youku Tudou, owned by e-commerce giant Alibaba.
Strict protectionism by Beijing regulators has prevented Netflix and Amazon from entering the huge Chinese content arena; the territory is among the handful of countries where the two U.S. streaming powerhouses are not yet active. On an earnings call late last year, Netflix CEO Reed Hastings conceded that a full China launch was unlikely in the near term, and that the company would focus on licensing for now.
Netflix achieved some early licensing success in China with House of Cards, which became a viral phenomenon through a deal with local service Sohu. The show was even known to Chinese president Xi Jinping, who once joked about it during a press event. It was later pulled from local streaming services by regulators.