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Why China is Absent From Amazon Prime Video’s Global Rollout

Variety logo Variety 12/14/2016 Patrick Frater
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While Amazon boasted Wednesday that its Prime Video service is now available in more than 200 countries and territories, China – the world’s most populous nation and second-largest entertainment market – is notably absent from the global rollout. So are North Korea, which is under a Stalinist dictatorship, and theocratic Iran in the Middle East.

The pattern is almost identical to the near-global launch engineered by Netflix in January. At the time, Netflix said it was working to find a way to launch in China. But last month, the streaming giant admitted that it was giving up for the moment.

Perhaps wisely, Amazon has said nothing about Prime Video in China.

China’s Communist regime presents formidable challenges to foreign media, and continues to demand that even the largest entertainment conglomerates operate on its terms.

Most foreign TV channels are not allowed landing rights in China, and only a few dozen have permission to be distributed to high-end hotels and apartments. That was a sticking point for years in Disney’s negotiations to bring its theme park into China, but the regulators have not budged.

Even those channels which have achieved that narrow access are subject to real-time censorship. Transmissions of BBC World and other channels routinely go blank during reports on subjects that Chinese authorities judge too sensitive and nearly always during reports about China.

More recent moves to bring in foreign channels and content via local Chinese distributors and over-the-top services have also floundered. In April this year, China’s media regulators closed down DisneyLife, a joint venture between Disney and e-commerce giant Alibaba, that was distributed on subscription and through a set-top-box. Those factors should have made it easy to filter out any undesirable content.

The same month, Apple’s iTunes Movies and iBooks were also both blocked by China’s regulators.

China’s President, Xi Jinping has made annual appearances (this year by video message) at the World Internet Conference to present his alternative view of the Internet. Xi says that China will work to promote “cyber sovereignty,” a concept in which each country is free to set its own rules and exercise absolute control of the Internet within its own borders.

If anything, China is currently exerting more control. This week it punished Ifeng.com for unauthorized coverage of the U.S. election. On Tuesday, live streaming platforms were told that they need to register for new permits.

While filtering the content that the Chinese public can read, hear or see is clearly a factor in the Chinese regulators’ stance, there are also economic reasons.

The country is trying to grow its own world-beating champions. In more traditional sectors, these have included giant steelmakers, oil refiners, and banks. In the telecoms-media-technology space, China’s contenders include search engines such as Baidu, social media platforms such as Tencent’s WeChat and e-commerce player Alibaba. With market capitalizations approaching $250 billion, both Alibaba and Tencent are no longer start-ups and are instead among the world 20 largest conglomerates.

While both these days have superbly innovative and multi-layered products, they have been partially sheltered within China from the winds of global competition. China is currently off limits for Facebook, and Google removed itself from China when it decided that it could not comply with China’s censorship and monitoring requirements.

In the online video sector, China has its own heavyweights too — Baidu’s iQIYI, Alibaba’s Youku Tudou and Tencent Video each count hundreds of millions of users. The business model is largely advertising-supported video-on-demand (AVoD,) substantially different from a la carte models or Amazon Prime and Netflix’s subscription VoD presentations. Though SVoD may now be growing in China, championed by iQIYI.

Facebook recently hinted at introducing new technology that might put it in compliance with China’s censorship rules. But the recently introduced cyber-security law (which takes effect from June next year) could still trip it up.

The law requires a variety of foreign companies operating on China’s part of the Internet to store data locally in China and to only use Chinese-approved equipment. That is widely understood to mean the kind of technology that has back doors through which Chinese authorities can have access.

Until Amazon can figure out how to be a media player without running afoul of regulatory, censorship, and technology rules, it makes sense to leave China off the Prime Video launch list.

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