James R | On 28, Apr 2017

Netflix has made its first major step into the Chinese market this week, with a new deal with iQIYI.

The streaming giant expanded its reach worldwide last year, taking its service to almost 200 countries. One, though, has remained tantalisingly out of reach: China. The country is one of the biggest markets on the planet and has been a target for Netflix for some time. However, Chinese laws make it a very difficult marker to enter. Only last year, MUBI announced plans for a partnership that would give it access to China, only for the deal to fall through.

“The regulatory environment for foreign digital content services in China has become challenging,” admitted Netflix CEO Reed Hastings in a latter shareholders in the second half of last year. “We now plan to license content to existing online service providers in China rather than operate our own service in China in the near term.”

Sure enough, the company has inked a licensing agreement with one of China’s most established local counterparts: iQIYI. A subsidiary of search engine Baidu, iQIYI is in the process of migrating from an ad-supported service to a subscription-based platform.

The exact terms of the deal are unclear, but it will include a subset of Netflix original series, such as Stranger Things and Black Mirror.

“Though expectations of our deal are modest in scope, we are delighted that consumers will be able to enjoy these highly-popular series on iQIYI, the leading online video platform in China,” said Netflix in a statement. “Our cooperation will be subject to the relevant regulations on online streaming of imported drama and film content in China.”

What’s the benefit for Netflix from the deal?

“We expect revenue from this licensing will be modest,” said Hastings last year. “We still have a long term desire to serve the Chinese people directly, and hope to launch our service in China eventually.”

Indeed, it is hoped that the agreement will help to build awareness of the Netflix brand among consumers.

“China is an important market for obvious reasons; it’s also a challenging market for obvious reasons,” Robert Roy, Netflix’s vice president of content acquisition, told THR. “For us, it does a couple of things. It gets our content distribution into the territory and builds awareness of the Netflix brand and Netflix content… 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.”

THR reports that iQIYI service will make some Netflix originals available day-and-date with the rest of the world.

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