Well, Chinese e-commerce and tech giant Alibaba (BABA) is setting its sights on the $5.9 billion internet video market in China, much to the chagrin of Netflix (NFLX) shareholders. Netflix stock was down as much as 2% in early trading Monday on the news.
But before we shed too many tears for NFLX stock, let’s look briefly at its recent performance. Through Friday’s close, shares had surged 93% year-to-date, making it the S&P 500’s top performer for 2015.
The BABA stock price, on the other hand, was down 17% to-date as it steadily sold off from its all time high of $120 per share back in November.
While personally I’m a big fan of NFLX stock and believe it’s well on its way to $750 per share, there’s no denying that Alibaba’s entrance into the Chinese streaming market makes the prospect of Netflix in China far less compelling.
BABA Wants to Be Like “HBO and Netflix in the U.S.”
If executed well, the move could provide just the boost that BABA stock needed. But the streaming platform — which will be called Tmall Box Office, or TBO — is thoroughly unoriginal in both name and structure. Adopting the pay-by-the-month model of NFLX, Alibaba also mimicked the name of Home Box Office, or HBO, the wildly popular premium TV channel owned by Time Warner (TWX).
Unoriginality aside, the BABA streaming service will launch in about two months, and feature some original content alongside a library of acquired TV and movie titles. That’s a major positive for BABA stock — and quite the setback for NFLX stock.
The Wall Street Journal quotes the president of Alibaba’s Digital Entertainment division as saying that the first original show will be a crime drama in “an American TV series style.”
Some free content will be available through the BABA streaming service, but the vast majority — about 90% — will be behind a paywall, according to the WSJ.
The plans are frankly somewhat devastating to Netflix’s China plans. With the Chinese government’s aversion to foreign companies and strict censorship rules, Google (GOOG, GOOGL), Twitter (TWTR) and Facebook (FB) are all banned. NFLX noticed this disturbing xenophobia and, last month, reached out to Wasu Media Holding, one of just seven Chinese media companies with government-issued licenses for Internet video.
But it looks like BABA CEO Jack Ma, who holds a 20% stake in Wasu Media Holding, saw the opportunity and would rather just do it himself. Given Ma’s cozy relationship with Chinese regulators, I wouldn’t be surprised to see BABA’s streaming video service take off in China before Netflix’s.
When you consider that the $5.9 billion online video market in China is expected to triple by 2018, NFLX really got hosed on this one.
As of this writing, John Divine was long shares of AAPL stock, GOOG stock, and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
