Netflix Scraps Plans to Launch in China For Now

Company says it will seek content-licensing deals with existing service operators in Middle Kingdom

Netflix said that for the time being, it will not seek to launch its streaming subscription service in China, citing a “challenging” regulatory environment in entering the world’s most populous nation.

The company announced the change of strategy as part of releasing third-quarter 2016 earnings. Instead of operating its own service, Netflix said in the near term it plans to license content to existing online service providers in China; revenue from those licensing deals is expected to be “modest.”

“We still have a long-term desire to serve the Chinese people directly, and hope to launch our service in China eventually,” the company said.

Netflix CEO Reed Hastings, at the New Yorker’s TechFest event earlier this month, said the possibility of its entry into the Chinese market “doesn’t look good.”

“We’re focused on the rest of the world,” Hastings said at the event. He said both Disney and Apple, who have a strong track record in the country, had their movie services shuttered by Chinese authorities.

In August, a top exec for Chinese video and technology group LeEco said it was in talks for a “significant” deal with Netflix. However, Variety reported citing sources close to LeEco, the deal is likely to cover Netflix-owned shows playing on LeEco’s video-streaming platform in the U.S.

While Netflix had been eyeing entry into China for some time, it cautioned investors that a Chinese iteration of the service would likely take several years to materialize and require it to censor some content in order to comply with local regulations. The company launched in some 130 additional countries earlier this year, to have a presence in about 190 worldwide.