Netflix has decided to drop its stand-alone streaming service in China for now, even though the streaming service has already established its operations in 190 countries.
During the release of its third-quarter earnings for 2016, the streaming giant announced it was switching to a strategy of licensing its content to existing providers in China instead.
The regulatory environment for foreign digital content services in China has become challenging.
“We now plan to license content to existing online service providers in China rather than operate our own service in China in the near term,”Â Netflix said in a letter to shareholders.
Actually, Netflix blew through its forecast for subscriber additions in the September quarter, its international subscribers surged 3.2 million to 39.25 million, a sign that the company was gaining momentum as a global television service.
Its revenue also exceeded US$2 billion for the first time in its history.
The service credited a robust line-up of original programming, including Stranger Things and Narcos, which helpedÂ draw fans to the service.
However, for foreign companies, entering the lucrative-yet-complex Chinese market is no walk in the park.
Earlier this month, Netflix CEO Reed Hastings admitted its Chinese ambitions had hit a wall at the New Yorker Tech Fest. â€śDisney, who is very good in China, had their movie service shut down. Apple, who is very good in China, had their movie service closed down. It doesnâ€™t look good.â€ť
The move, however, speaks to a larger truth: Chinaâ€™s censorship and other regulatory constraints make it one of the toughest markets for US internet companies.
Recently,Â car-hailing company Uber decided to sell its Chinese operations to Didi Chuxing, marking the end of its costly and unprofitable efforts to establish a foothold there.
But the plan for a full Netflix operation in China hasnâ€™t been abandoned completely.
â€śWe still have a long term desire to serve the Chinese people directly, and hope to launch our service in China eventually,â€ť the company said.