This week’s first-time disclosure by Chinese online video firm iQIYI of its subscriber numbers and the confirmation that Alibaba will soon be ramping up its own subscription video service have put a new spotlight on the financial feasibility of China’s video streaming sector.

Both developments also highlight the multiple difficulties that would be faced by Netflix, the U.S. online video leader, which has announced vague plans to enter China. Some months ago Netflix talked about a solo strategy, but later recanted and spoke of finding a business partner in China.

iQIYI Tuesday reported that it has over 5 million paid-for subscribers for its premium VoD system. The company, which largely operates on an advertising supported business model, said that SVoD numbers have surged in the past two quarters. Year on year growth in SVoD subscribers was 765%, the company claimed.

“The success of iQIYI’s paid subscription model demonstrates the strong demand of Chinese audience for online-video platforms with high-quality content. Users’ willingness to pay for content reflects the huge opportunity and potential for iQIYI and the online-video market in China,” said Gong Yu, its founder and CEO.

But headlines can be misleading. If the iQIYI number seems to offer comfort to those who argue that China is soon about to develop a large and meaningful paid-for ancillary market, the detail suggests that Netflix’s target may already be out of reach.

Similarly, some media headlines naively described the launch of Alibaba’s T-Mall Box Office as a response to an imminent threat from Netflix. That is a nonsense when Alibaba is already miles ahead in the sector, and when anyway SVoD is only one of Alibaba’s hundreds of different product lines.

Netflix has to solve at least eight major problems before it can become a rival to any incumbent in China.

1) Strong local competition: If iQIYI’s numbers are correct then the Chinese video market may already have some 10 million subscribing customers. Its direct rival Youku Tudou reported 1 million subscribers at the end of 2014. Tencent Video probably has about the same, and other players a similar combined figure. The biggest number may actually go to Xunlei, whose cloud servers have some 6 million subscribers accessing content of questionable legitimacy, especially pirated foreign content and Japanese pornography.

2) Getting people to pay: Converting China’s legion of users who are used to getting their content for free into paying subscribers is a tough ask. Both Youku Tudou and iQIYI have operated SVoD for about four years and are only now beginning to get any traction. Youku Tudou claims some 550 million monthly active users, iQIYI over 500 million, meaning that so far they have converted only 1% into regular subscribers.

One factor that is now helping SVoD in China is a generational shift and expanding middle class. Yang Xianghua, senior VP of iQIYI, explains: “The generation of users born post 1990 understands the value of content. They are cash rich, but time poor. They are willing to pay for the convenience of accessing quality without having to go through the complications of finding illegal content.” Experience in related sectors suggest that a 2.5% conversion rate may be possible, with a period of 3-5 years needed to develop it.

3) Specialty niche vs competition from vertically-integrated conglomerates: If Netflix were to enter China, it would be offering a single product, subscription video. Its competitors in China are all playing a much bigger game, which these days is known as Internet Plus, or selling stuff. For some players video may be nothing more than a loss leader.

IQIYI is part of and technically well-integrated into search giant Baidu. Tencent Video is part of the social media leader Tencent with its WeChat and QQ products driving traffic and simultaneously benefitting from online video consumption to drive offline consumerism. LeVision/LeTV currently seems intent on using video for upselling related media technology (phones and smart TVs). And both Youku Tudou and Wasu Media are companies with major investment stakes held by Alibaba – the world’s largest e-tailer which is already using online video to sell movie tickets, games, merchandise and cultural tourism products. Alibaba wants its set top boxes to provide seamless navigation between media products and hard goods.

In each case, big data collection and analysis is already giving these companies a far greater understanding of Chinese consumer behaviour – temporal, geographical, generational, aspirational — than Netflix, which has yet to dip its toe into the market.

4) Payment systems: The recent modernization of China’s payment systems and the greater use of mobile devices for watching video is helping drive paid-for subscriptions. But among the dominant payment gateways are AliPay and WeChat Pay. So even if Netflix were to successfully build a Chinese subscription revenue stream, it would be giving away a portion to its biggest competitors, Alibaba and Tencent, respectively.

5) Low price points: The value of the Chinese business may be too low for Netflix to stomach. IQIYI sells subscriptions at RMB20 per month ($3.25) and RMB200 a year ($32.5). Those tariffs are low enough to stimulate impulse buying, but they may not be high enough to be profitable. Youku Tudou, which has its shares listed in New York, is currently unprofitable. iQIYI’s is also estimated to be loss-making, but detailed figures are unlikely to be revealed until it makes its anticipated IPO.

6) Single product strategy, lack of brand and need for local content: Netflix’s business to date has been largely built on American movies and its own top-quality series such as “House of Cards” and “Marco Polo.” While there is clearly an appetite for these in China, Chinese consumers also want local content. By some estimates, about 80% of viewing on the major Chinese platforms currently is for Chinese shows and movies. These are attracting audiences and, increasingly, converting them into subscribers. IQIYI says — and its rivals agree — that the company’s new “Lost Tomb” series may have won over as many as 2 million subscribers.

Currently iQIYI and Youku Tudou are spending around a third of their content budgets on in-house production, which would mean that Youku Tudou alone is spending $100 million a year on producing Chinese content. Unless Netflix can quickly put down deep roots in the Chinese TV industry, it is going to remain a purveyor of minority-taste, foreign content.

7) Windows: One form of content that scores strongly with Chinese consumers are movies that are available very quickly after theatrical release. In some cases only three or four weeks after opening. If Netflix cannot persuade the Hollywood studios to slash the windows for their blockbuster movies, then its lineup is always going to be behind the curve. If, however, windows are cut, then the benefit would likely flow to all the players.

Regulators in China have recently added to the windows difficulties for foreign TV series. Where previously imported shows were put through censorship on an episode-by-episode basis, since April 1 the entire season has to be approved first. That is an issue the Chinese platforms are already wrestling with – as it creates an opportunity for cross-border piracy – but would be a bigger problem for Netflix which would presumably be heavily dependent on such series.

Regulators may way also insist that a local Chinese version of Netflix would have to follow rules that specify a three to one ratio of local content to foreign programming.

8) Licensing and regulatory compliance: The biggest problem of all for Netflix is likely to be regulatory. Few foreign businesses are given the regulatory freedom in China to operate without local restrictions. That is especially relevant in a sector as politically sensitive as the media. And it is a sector which anyway saw regulation of existing firms recently increased.

In numerous other business sectors Chinese regulators have an established pattern of maintaining barriers to entry that keep foreign companies tightly reined until a time when local Chinese firms have grown to positions of strength. Once a sector has been cracked open, operational restrictions come in to play – witness the ongoing regulation of the film market through censorship, import quotas and central government decisions on movie release dates.

Netflix would have to first win an operating licence in China on its own accord. Later, it may find that navigating through the day-to-day operational obstacles would be best piloted by a local Chinese partner, either a state-owned one, or one of the new breed of big tough private sector players.

That might mean that if Netflix is going to make any progress in China it is would likely become a junior partner to Alibaba or Tencent, rather than be any kind of meaningful rival.