Netflix, Inc. (NASDAQ:NFLX) shares are up 5% today, and the catalyst for Netflix stock is a potential move into China and talk of a buyout by Walt Disney Co (NYSE:DIS).
But nothing concrete.
Sure, NFLX is looking to hedge its flagging domestic growth by entering emerging markets around the world, and China is near the top of that list of more than 130 markets worldwide. So if Netflix stock is getting a bid on the idea that such a deal might be close? OK.
But Disney? That’s pure fantasy. The thinking goes that DIS needs a conduit to offset cord cutting, and buying NFLX would be the next best thing. Of course, as Zacks writer Ryan McQueeney points out, why would Disney buy a company that it just signed an exclusive-content deal with?
The Likelier Driver of Netflix Stock: Chinese Hopes
For what it’s worth, that bit of news about China seems to at least hinge on information derived from this reality, as Netflix’s chief content officer, Ted Sarandos, believes “China is a great opportunity,” and assured Netflix stock holders that the company will continue to look into the best ways to penetrate the Chinese market. Still, hats off to CEO Reed Hasting if he can pull that off.
Remember, China hasn’t been the most accommodating of U.S.-based businesses looking for growth on its turf. In fact, it’s been downright hostile. China’s media regulator, just yesterday, sued Apple Inc. (NASDAQ:AAPL) over the rights to a film, Xuebo Dixiao, which is just the latest entry in a long, weird battle with Apple, among other U.S. businesses.
In mid-June, Chinese regulators attempted to ban Apple from selling its iPhone 6 in the country because it allegedly ripped off the design of Chinese company Shenzhen Baili’s 100C smartphone, a company that “barely exists,” according to the Wall Street Journal.
Imagine the hostility a company would receive if it were mentioned by Chinese President Xi Jinping, who totally threw shade at Netflix last year:
“We have punished tigers and flies. It has nothing to do with power struggles,” Jinping said. “In this case there is no House of Cards.”
And NFLX absolutely needs things to go right in China if the company is to get traction in the potentially lucrative market. That includes securing the time to capture data and determine trends in Chinese viewership. If the streaming giant’s troubles in other Asian markets — South Korea and Indonesia — are any indication, Netflix’s viability in China isn’t promising.
Sarandos, however, remains hopeful. Replying to reporters’ queries concerning Netflix’s South Korea strategy, Sarandos had this to say:
“The weakest point for Netflix, people say, is the local content, but that’s because we need time to learn not just the market and box office but about what and how Korean people watch.”
But until NFLX manages to crack China, subverting the media censorship and all, it looks like Netflix stock holders will have to settle for moderate international subscriber growth and the random, unsubstantiated hope of being bought out by the House of Mouse.
Not exactly what investors signed up for.
As of this writing, John Kilhefner did not hold a position in any of the aforementioned securities.
