CEO Reed Hastings onstage at CES 2016. Photo credit: Netflix.
UPDATE 8/10: The Information is reporting that Netflix has denied being in negotiations with LeEco. We’ll update further once this mess has been straightened out.
On Tuesday, Chinese video streaming and smart device powerhouse LeEco’s co-founder Liu Hong announced: “We are planning a very significant cooperation with Netflix.”
Oh, so Netflix is finally coming to China?
Nope. Turns out it’s pretty much the opposite. According to Variety:
Sources close to LeEco, who were not authorized to speak on behalf of the group, told Variety that the deal is likely to see Netflix-owned shows playing on Le Eco’s video streaming platform in the US.
That hasn’t been officially confirmed, but there are signs suggesting it’s true. For one, Liu Hong said that LeEco would provide more details on the partnership in Q3, suggesting that the deal may be announced as part of the LeEco North American strategy launch event scheduled for late September. And other media outlets have also reported that the deal is rumored to include content sharing. Rumor has it the two companies will make a similar deal in the Indian market, as well.
So that’s the what of Netflix’s deal with LeEco, as far as we can estimate. As for the why, your guess is as good as mine. What does Netflix have to gain by letting a Chinese company stream its shows in the United States or India, where those shows are already available? Netflix isn’t likely to facilitate the undermining of its own platform for no reason, so it must be getting something in return. But it’s hard to imagine what.
It’s hard to know what’s really going on here.
LeEco does have a significant hardware business, and its US hardware presence was bolstered significantly when it acquired Vizio for US$2 billion last week. But Netflix is a hardware-agnostic software platform and its app is already pre-installed on many smart TVs.
LeEco might provide an avenue for Netflix to launch in China in some capacity. But with China’s regulators regularly tightening their stranglehold on the online video market, the odds of an impending China Netflix launch look miniscule.
LeEco and Netflix could simply be engaging in content sharing, but it’s hard to imagine LeEco having access to the US rights for many shows Netflix would want. Chinese films and TV shows, by and large, have only a very niche audience in the US.
Of course, Netflix could just be receiving buckets of cash in return for its content. That wouldn’t be out of character for LeEco, which has splashed big cash on everything from the Vizio buyout to its smart car division over the past few years.
It’s hard to know what’s really going on here, but we should get a better idea in September when LeEco lays out its North America strategy and – in all likelihood – shares the details of this Netflix deal.
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