Netflix is looking to enter the Chinese market and is analyzing the potential. Some key points:
- China has a large potential market that is growing with increased internet and mobile adoption.
- Netflix would focus on creating original Chinese content and partnering with local production teams to appeal to Chinese audiences.
- They would face competition from established players like iQiyi, Tencent, and Alibaba in China.
- Netflix would need to comply with China's censorship laws and cultural differences compared to other markets.
- A strategic partnership or direct investment would allow Netflix more control but be more expensive than just licensing content.
- Their budget for entering China would be $2 billion focused on content creation and marketing
1. Mike Pabon, Sam Golymbieski, Nova Nahiyan, Nicolas Ramos, Indy Aguilar
2. Founders
● Founded on August 29th, 1997 in Scotts Valley, CA
Reed Hastings Marc Randolph
3. What is Netflix?
Netflix is the largest video streaming service worldwide with 158 million subscribers
in over 190 countries.
They primarily focus on producing original content but also offer an extensive library
of licensed content
6. Situation Analysis: China
Advantages
● 2nd Largest Economy
● Netflix is available in Hong Kong and
surrounding countries
● Over 800 million internet users
Disadvantages
● Strict government regulations
● Demographic response
● Unappealing content
7. Market Potential
The market will triple in size to 73 billion yuan (US$11.5 billion) in the next five years
● Due to increased mobile adoption and amplified broadband expansion
9. Customer Needs
Product Features/Benefits
Corresponding
Customer Needs
Trending Content
Popular shows trending in other
countries
Convert content language to
mandarin and other sublanguage
Original Content
Create original content using local
production teams
Variety
Local Content
Add Chinese hit shows and
movies to Netflix platform
Create a nostalgic connection
10. Market Compatibility
Chinese Market
● Focus on creating original content
● Invest in local content to increase the
demand
● Adding content in Mandarin
● Comply with Chinese censorship laws
Key Similarities:
● Hit Shows
○ Ex. “Stranger Things”
● Both markets have access to content due
to technological advancements
Key Differences:
● Censorship laws
● Cultural difference
11. Entering the Market
Exporting Joint-Venturing Direct Investment
● Only selling DVDs
● Least expensive
● Continuing to license
with other companies
(iQiyi)
● Least control
● Licensing fees
● Being able to share
their streaming
service directly to the
Chinese consumer.
● Most control
● Most expensive
12. Strategic Partner
● Largest streaming platform in China
● Netflix had a content licensing agreement from
2017-2019
● This service offers a variety of subscriptions with a
range of price points to satisfy all customers
● Includes video games, social media apps, music,
and video streaming.
13. Competitors
Alibaba iQiyi Tencent
Revenue 40% increase
7% increase
Reached 1 Billion
21% increase
User count
Increased 200
million users
105.8 million paying
subscribers
35 million paying
subscribers
Profit/Cash Flow 4.5 billion in profit
1.9 Billion cash flow
as of third quarter
close
4.3 Million operating
profit
15. Competitors Weaknesses
● Alibaba
○ Too many merchants
○ Extremely dependant on Chinese economy
● iQiyi
○ Lacking in earnings acquiring more costs
○ Phasing out business advertising
● Tencent
○ Media blackout restriction from Government of NBA games, restrictions put in place on
certain video games
16. Key Competitors
1. Tencent Video
● 457 million MAUs
● Users can upload videos
● Original content
● Exclusive partnership with HBO
1. Baidu's iQiyi
● 481 million MAUs
● Acquired the rights to a large number of South
Korean films
● Partnered with Japan's Fuji TV for the production
of online drama
1. Alibaba's Youku Tudou
● 325 million MAU
● Multi-screen entertainment and media company in
China
● Comparable to Youtube
17. Budget
Netflix’s budget
● 2018: 12 Billion
● 2019: 14 Billion
○ Revenue: 16 Billion
● 2020: 18 Billion (Projected)
China’s Budget
● 2 Billion
○ 70% for Content Creation
■ Create around 200 new shows
○ 30% for Advertisement and Research
18. Product Review
Plan Benefits Price
Basic
● 1 screen
● Netflix Originals
● Local TV shows
70 CNY / 77.25 HKD / 9.86 USD
Premium
● 2 screens
● Netflix Original
● Local TV Shows
● Local Movies
75 CNY / 82.77 HKD / 10.57 USD
Ultimate
● 4 Screens
● Netflix Originals
● Local/Global TV Shows
● Local/Global Movies,
● Worldwide Blockbuster Movies
85 CNY / 93.80 HK / 11.98 USD
19. Strengths
1. Already created shows and movies in
Mandarin
2. Available in nearby countries
Weaknesses
1. Censorship laws
2. Netflix needs gov approval
Opportunities
1. Partnerships with popular streaming
services
2. Potential to renew contracts for the
future
Threats
1. iQiYi
2. Alibaba
3. Tencent
SWOT Analysis
20. Marketing Strategy Overview
● Use local productions team
○ China Film Group Corporation
○ Huayi Brothers
● Hire Chinese actors
○ Kris Wu
○ Andy Lau
● Film in Asian locations
21. Microenvironment
● Top Male Chinese actors
○ Kris Wu
○ Andy Lau
○ Nicholas Tse
○ Eddie Peng
○ Hu Ge
● Netflix has already partnered with
Kris Wu
22. Demographic Environment
● Target Demographic
○ Teenagers
○ Young adults
● The average consumer is straying away from regular cable with the raise of internet
● There are also a wide variety of different languages spoken in China
○ Netflix can expand and make more original content in there's other Chinese
languages
23. Institutional Markets
● Partnership with schools, hospitals, etc
○ Discounted rate in exchange for service
○ Raises awareness
● Student discount for high school and college
students
○ Ex. Amazon Prime, Spotify Premium +, and
Hulu in US
● Targets the environmental setting of our main
demographic
24. Economic Environment
● Monthly subscription
● Annual subscription
● First month free trial
● Target regions with higher income
first
○ Shanghai
○ Beijing
○ Hong Kong
25. Sales Promotions
● Different sales promotions throughout
the year
● The promotions will typically last
between 2 weeks to a month
○ Create pressure on consumers to
take advantage of the deal and
take action ‘Right Now’
● Netflix will target promotions around the
holidays
○ Christmas and Chinese New Year
are some of the events that will be
targeted
26. Marketing Research
Survey Questions
1. If Netflix was available in China, would you subscribe?
2. What is the maximum price you would pay for Netflix?
3. What genres of movies and shows would you prefer?
4. Is it important for shows to be authentic to the Chinese culture?
5. Would you watch content from the United States?
27. Customer Insights
● More consumers are switching over to streaming services because Chinese
TV is too regulated
● Consumers say content plots and themes are always the same
● Commercials are scripted and airbrushed
● Streaming lets consumers see a different side to shows and movies
● The increase in censorship laws causes people to stream other shows
29. Characteristics Affecting Consumer Behavior
Cultural Social Personal Psychological
● Religious
● 7 Different
Dialects
● Heavily
influenced by Art
● Traditional
● Middle class has
more decision
power than 10
years ago
● Currently is 31%
of the population
● 600 mil. users
offline
● Age 15-35 (30%
of Population)
● Unappealing
content
30. Buyer Decision Process for New Products
Awareness Interest Evaluation Trial Adoption
● Social
impact
● Social media
recognition
● Seek info
about Netflix
● How it
appeals to
the Chinese
market
● Decide if
they want to
purchase
● Utilize the
free trial
● Determine if
they like it
● Pay for a
regular
subscription
31. Business Buyer Behavior
Environmental Organizational Interpersonal Individual
● Growing Economy
● 18-35 year olds
spent 1.6 billion on
goods in 2016
● Growing
technology
● Younger
generation
breaking tradition
● Targeting younger
generation
● Will be the buying
decision
● iQyi
● Tencent
● Alibaba
● 18-35
● Middle Class
● Preferences:
Looking for
original content
33. Services Marketing
Company
Employees Customers
Internal Marketing:
● Create customer
service offices in
China to focus on
customer connection
Interactive Marketing:
● Customer service training
● Social media presence
External Marketing
● Online advertisements
● Online trailers on social
media
34. Interactive Marketing
Service Differentiation
● Netflix needs to provide a customer service that goes above and beyond what they currently
have in China
Service Quality
● Simple user interface
● Simple set up setup
● Secure payment process
Service Productivity
● Network and account issues will be met fast and quickly.
● Chinese IT location to handle any network issues that may arise
35. Brand Strategy
Line Extension
Existing series being released in
China
Brand Extension
New series’ and movies pertaining to
Chinese market
Partnerships with education &
hospitality institutions
Existing New
36. Straight Product
Extension
Product Adaptation Product Invention
● Offer existing Netflix
originals to the new
market
● Offer existing original
content with subtitles
● Mandarin voice over
● Create new content
specifically catered to the
Chinese market
Products
40. Alternative Distribution
● Exclusive Distribution
● Give a limited number of platforms
the exclusive right to stream
content
● Limit the number of intermediaries
○ Makes our content unique
and increase demand
● Enhances dealer support and
customer service
41. Channel Design
Analyzing Consumer Needs
● Creativity
● Authenticity
● Variety
● Streaming Online
Setting Channel Objectives
● Purchase Online
● Online Customer Service Support
● Eventually will build an office in China
Identifying Channel Alternatives
● Stream our content exclusively
● Partner with another company in China if we
can’t stream it on our own
Evaluating Channel Alternatives
● Full control of our content even when
partnering with another company
● Don’t restrict customers to a long term
commitment
42. Marketing Logistics
● Focus on creating budget friendly shows
● Choosing budget friendly but popular
locations to film in
● Creating an online culture of ‘hype’
before the show gets released.
45. Marketing Communication
Rational Appeal Emotional Appeal Moral Appeal
High quality for a low
price
Previews that elicit an
emotional response
Content that appeals to
everyone’s beliefs and
values
46. Advertising Objective
● Persuasive Advertising
● Build brand preference for Netflix
● Encourage consumers to switch
● Perceive our product to be
exclusive and original
47. Advertising Strategy
● Native advertising on Weibo
○ Content matches other content on
the site and doesn’t resemble the
typical ad
● Share ads, previews to shows and
movies
49. Influencer Requirements
Can be an actor used in our films/ shows or an already
famous influencer
Must be within a certain territory we are trying to get
into
Minimum of 50,000 followers
Must be within the age group of 18-35
51. Public Relations
● PR controls crisis management for
the chinese location
● PR company will also advise and
screen show launches and vett
celebrities and influencers with
who netflix decides to partner with
52. Sales Force Strategy
● Want to open offices in the bigger territories of China to be able to hire local
people to work for the company
● Investing in influencers in specific territories to promote the streaming service
on social media
● Customer service sales force available through phone number or online chat
53. Sales Force Management
Use social media
influencers and actors
to promote our
content available on
Netflix
Select well known
influencers and
actors from Netflix
Phone training/Group
training
Set payment
rate/Offer incentives
for new subscribers
Check in with
influencers and their
posts
Evaluate progress by
the amount of new
subscribers they bring
in
54. Societal Market - Desirable Product
Salutary
Products
Desirable
Products
Deficient
Products
Pleasing
Products
Immediate Satisfaction
Long-
Run
Consumer
Benefit
Low
High
Low
High
● Offers immediate customer
satisfaction with the ability to
instantly stream a variety of
movies and shows
● Long Run Benefit - One stop
destination to view multiple
genres of films and movies
including exclusive Netflix
content
Nova
Why china would be a good market to invest in…
Some of the obstacles we might face in china would be
From our past experience in China we have noticed that the demographic response hasn’t been upto our expectations; good but not good enough
That relates to content
Mike
Here’s a graph showing
Mike
Mike
Nick
International subscriptions are increasing while domestic subscriptions are decreasing
Sam
Netflix has the option to enter the market through exporting, joint venturing or making a direct investment in China
Exporting would be if Netflix were to only sell DVDs like they did before they started online streaming. This is the least expensive option but since online video streaming is so popular, it would not compete with the current services available
Joint venturing would be entering a licensing contract like they previously has with iQiyi. However, in this option Netflix would have the least amount of control over the content that they releasing and Netflix would have to pay a licensing fee to the parent company
And a direct investment would be if Netflix’s online streaming platform was directly available to the Chinese consumer. This offers the most amount of control but is the most expensive, however, if it were to catch on with the general public, it is an investment that Netflix is financially able to make
Sam
Netflix’s biggest alliance and strategic partner is iQiyi. They are currently the biggest streaming platform in China. Netflix previously had a content licensing agreement from 2017-2019. iQiyi offers a variety of subscriptions with a range of price points that satisfies all of their customers. Some of the subscriptions include access to video games, social media apps, music, as well video streaming.
Indy
Alibaba- over 2 years
iQiyi/ Tencent- Quarter 3
https://www.alibabagroup.com/en/ir/presentations/pre191101.pdf- Alibaba
https://iqiyiinc.gcs-web.com/static-files/0d792a6d-48cd-4b83-85de-3158a8ce2c79- iqiyi
http://cdc-tencent-com-1258344706.image.myqcloud.com/storage/uploads/2019/11/09/77248c95e2a3295269c2875c8c908f86.pdf- Tencent
https://www.barrons.com/articles/alibaba-aims-to-serve-1-billion-customers-a-year-by-2024-51569349858- Alibaba
https://www.cnbc.com/2019/11/12/tencent-musics-quarterly-revenue-beats-on-subscriber-growth.html- Tencent
https://www.bloomberg.com/news/articles/2019-11-11/tencent-falls-90-billion-behind-alibaba-after-nba-china-clash
Nova
Perceptual positioning map;
novelty western american brand
Nova
Amazon and apple spent 6B on content
Spent 1 Billion on Europe Budget - 221 new shows ;
We would focus content budget to making more shows in their native language, showcasing their landscapes and cultural environment.
Usually spends 85% of their budget for content creation but we are allocating more for advertisement and research,
We have found that most people don’t search for content on Netflix, most of us will only watch shows that comes up on their main homepage;
https://www.alibabagroup.com/en/news/press_pdf/p180504.pdf
nova
Nick
Strengths - Available already in the Asian-Pacific region
Indy
Indy
sam
sam
sam
Mike
Create specialized logos, ads and ‘gifs’ and distribute them through social media and other online outlets
Indy
Indy
Indy
Dramas: Mystery of Antiques, Forty Years We Walked, Well Intended Love, The Legend of Hao Lan, Candle in the Tomb: The Wrath of Time, Behind the Scenes, Spu Hunter, I Will Never Let You Go, Anti Japanese, The Story of Minglan
Nick
Older groups of people- traditional, religious and conservative
Personal - 30% is the active internet users in China
Psychological - Netflix in previous years had unappealing content during the temporary partnership, there were shows that didn’t reach the audience
https://www.populationpyramid.net/china/2016/
Nick
Social media and the internet has a huge impact on creating awareness on products for chinese consumers
The more interest an ad or social media generates the more it appeals to chinese market
Nick
Interpersonal - Chinese consumers already have a bond with competitors therefore we want to peak their interest with the content that Netflix has to offer
Mike
Sam
Sam
Mike
Mike
Mike
Indy
https://www.macrotrends.net/stocks/charts/NFLX/netflix/revenue
In a maturity stage
Nick
Possible distribution channels include partnering with companies such as iQiyi to stream our content to the consumers
We can directly stream our content through our own platform to the consumers
Nick
Indy
Nova The goal of marketing logistic is to achieve targeted level of customers at the least cost. To achieve our goal, Netflix will have to look to cut costs by …. Release of trailers; and hype up culture, reminding you countdown of days, have the artists / actors market it through their social media, instagram contests and the winner can win a free merchandise or product related to the show,
Nova
We would hire an on-site PR company and professionals who specialize in international relations between China and America
And in the case of emergency / accident or controversy we would refer to the standard policies in China.
A formal apology followed by an action such as either cutting them off
