Alibaba’s Netflix Ambitions

Video Streaming Gets a New Giant

Alibaba logoOver the weekend, Alibaba announced that it’ll introduce a video streaming service in China offering a combination of premium and free content. Alibaba stated that it plans to emulate Netflix and HBO, although unlike those two services it’ll provide about 10 percent of material for free — a strategy that will help build the service’s brand and an idea Western competitors might want to emulate. The name of the service — Tmall Box Office, or TBO — is a reflection of its inspiration. In late 2014, CCS Insight highlighted the expansion of Asian players such as Alibaba into video services (see CCS Insight Predictions for 2015).

The announcement of TBO comes a month after the Wall Street Journal reported that Netflix was in talks with Chinese online services to bring some of its content to China. While Netflix is still exploring its options for entering the Chinese market and is considering the possibility of going it alone, CCS Insight believes that forming a local partnership would be the more sensible approach. Exporting video content and services into China poses several challenges particular to that market, including potential objections from government censors and the high degree of content piracy. The approval process for foreign TV content could involve the screening of an entire season of a series, causing availability delays and making illegal downloads all the more enticing.

Alibaba is not breaking new ground in China with its streaming service. TBO will compete against established domestic streaming sites such as Youku Tudou (which is partially owned by Alibaba) and Sohu. It also faces indirect competition from overseas content providers.

China has more than 350 million fixed-line broadband subscribers and about 500 million mobile Internet users. Although the size of the market offers opportunities, intellectual property and regulatory challenges will continue to give domestic firms competitive advantages.

Though Alibaba has introduced TBO as a service for China, regional expansion to other Chinese-speaking regions is likely. China’s LeTV recently introduced a streaming service to Chinese speakers in the US: see Bold Expansion Plans from LeTV (Who?). Alibaba’s long-term global ambitions could mean the introduction of other localised content services from the company. This comes at a time when Amazon and Netflix are depending on aggressive global expansion of their streaming services.

Alibaba’s wide portfolio of products and companies includes the Alibaba Pictures Group, a large Chinese film production and distribution firm. Alibaba’s interest in making the most of this asset along with its hundreds of millions of users provides it with a fast-track entry into the market. CCS Insight expects further moves in online video with a number of large partnerships and acquisitions, including a possible Netflix takeover. The disruption from streaming is still in its early stages and is going global.