The Strategist

Alibaba Is Going to Compete with Netflix

09/02/2015 - 15:26

China's largest online retailer - the company Alibaba - launched streaming video service. So far, Netflix’s competitor is available only in China via TV operating system for smart TV.

Marit & Toomas Hinnosaar via flickr
Marit & Toomas Hinnosaar via flickr
The project is called Tmall Box Office and provides access to both Chinese shows and movies, as well as to foreign video content. The subscription fee costs about $ 6.10 per month.

The first plans for the launch of streaming video service were announced in June. The company wants to repeat the success of US companies in China. As in the case of Netflix, the program schedule will consist of licensed content along with original shows and movies produced by Alibaba. For these purposes, the Chinese e-commerce giant has a studio Alibaba Pictures Group.

- Our mission - to redefine the direction of home entertainment, - said the head of digital entertainment content at Alibaba Patrick Lew.

In the domestic market, Alibaba will compete with a number of companies: Tencent Holdings Ltd, iQiyi from Baidu,, LeTV - Leshi Internet Information & Technology Corp Beijing. Another competitor is Youku Tudou Inc. - one of the largest in China videostreaming platforms, 16.5% owned by Alibaba.

Streaming video is very popular in China, but most consumers are accustomed to the free model. Major players, such as Youku Tudou and iQiyi, managed to cajole only 1% of the total number of viewers into the paid subscription.

Yet, analysts designate a bright future with the growth of a paid model of Internet payments. Medium-term growth will be driven by several factors, including the growth of online shopping in public transport, which is being actively developed on the ground of Wi-Fi and 4G introduction.

The volume of digital transactions will further increase due to the transition from physical formats (DVD, CD-ROM) to digital and the growth of user subscriptions.

Experts also note a surge of e-commerce in China, where Alibaba during 2014 attracted more than 330 million customers. Last year, online sales in China amounted to nearly $ 450 billion, and it helped the company get around the US, where online purchases in 2014 totaled $ 296 billion. Thus, China became the largest market for e-commerce, followed by the United States, Japan, Great Britain and France.

Alibaba has obvious advantage in streaming services: the quality of the video stream, and, most importantly, the original content. The entertainment division of the holding includes Guangdong Yueke - one of the largest suppliers of cinema tickets in China.

According to Yueke’s official website, its business covers 1500 cinemas, which equals about one-third of all cinemas in China. They are also partners of more than 30 popular sites to purchase tickets online. Guangdong Yueke help streaming service TBO estimate what content the Chinese are willing to pay for.