Market Insight

Disney partners with Alibaba to launch DisneyLife in China

December 17, 2015  | Subscribers Only


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The Walt Disney Company and the Alibaba Group have announced a multi-year licence agreement to launch DisneyLife, a new on demand streaming service, in China. China will be the second market for DisneyLife, after its exclusive launch in the UK in late November. Playout will be provided by Wasu Media.

Dubbed  a 'holistic home-based kids and family digital destination' by Disney, the over-the-top service will offer movies from Disney and Pixar, animation series, games, e-books and songs. While DisneyLife in the UK can be accessed by browser or app, users in China will require a Mickey Mouse-shaped digital media adapter (DMA) to connect to Disney programming on TV. Available for presale from 15 December on Chinese retail website tmall.com, the device is priced at RMB 799 ($125) and will include a one-year subscription to DisneyLife. The cost of a further annual subscription is currently RMB 480 ($75).

Importantly the device will also provide access to Alibaba’s Digital Entertainment Business; which includes games, TV and music from content providers including Wasu TV, YouKu, Tudou.com, TBO, and Discovery. Alibaba’s services currently require no subscription after the first year. The streaming device will also provide additional services and features including Alibaba products and services and information about Disney theme parks. The launch comes as Disney prepares to open a new theme park in Shanghai in 2016 backed by an investment of $5.5 billion.

Our analysis

China is the one major international market where international programmers like Disney are not permitted to distribute their own branded linear TV channels. An over-the-top service, in partnership with a powerful local player in the form of Alibaba, is the preferred market entry strategy, which other companies may look to follow - especially given Chinese consumers' enthusiastic embrace of online video services. Netflix is known to be looking for a suitable Chinese partner, but has not yet announced a deal. Alibaba already has a streaming partnership with US mini-major studio Lionsgate for an SVoD service offered via the Chinese e-commerce giant’s own set-top box.

Alibaba has a 20% stake in Wasu Media, which has one of seven government licences for Internet TV. Since 2014, China’s media watchdog the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) has tightened its governance of online broadcasting. All internet TV services must be transmitted via the network of any of the seven internet content provider licence holders: China Network Television, BesTV, Wasu Media, Southern Media, Mango TV, China International Broadcasting Network and China National Radio. SAPPRFT has also been tightening restrictions on the proportion of foreign programming allowed within online video services and it is not yet clear how Disney’s proposition will meet those hurdles - particularly if the DisneyLife device only offers Disney content.

Alibaba has been aggressively beefing up its digital media portfolio. In April 2014, it acquired its stake in IPTV operator Wasu Media, using it as a vehicle to launch set-top boxes using Alibaba’s own operating system YunOS. It now owns stakes in online video platform Youku Tudou, and film production companies ChinaVision (now known as Alibaba Pictures), Huayi Bros and Beijing Enlight Media. In July 2014, Alibaba also revealed plans for Tmall Box Office (TBO), an SVoD service offered its Tmall set-top boxes.

At $125, a DisneyLife subscription is considerably higher than other online video services. In China, an annual online video subscription is typically priced around RMB300 ($46) or less. However, many online streaming platform such as iQiyi, Sohu and Tencent target youth and young adults while DisneyLife intends to position itself as a specialised kids and family service.

A key challenge is the omnipresence of pirated set-top boxes and the government’s increased scrutiny. Pirated set-top boxes are rife in China; in fact, the industry estimate is that less than 20% of those in use are legitimate.

Geography
Asia Asia Pacific China
Research by Market
Media & Advertising
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