Disney+ May Already Be Planning to Enter China Through Its Partnership With NetEase (Part I – VPN Pilot Zones)

By Ryan Carroll, Managing Editor


August, 2019.

For Part II of VPN Pilot Zones

Beijing will allow foreign companies, streaming or otherwise, to invest into Chinese streaming services; video games, online publishing, and video streaming, by the end of the year.

This reporting comes from Beijing News in what the Beijing Regulators are referring to as “VPN Pilot Zones” with the program being implemented over the next three years.
Foreign companies that invest into Chinese streaming services will participate in less-than 50% of the revenues in these “VPN Pilot Zones”.

This does not mean that the foreign streaming companies can launch their own streaming service, such as Netflix, Hulu, or Disney+, entering directly into the Chinese streaming market. It simply means that they can invest into an established streaming player like; 163.com (NetEase), Youku (Alibaba), iQiyi (Baidu), Bilibili, or Tencent Video, and potentially have their content distributed via those platforms.

Foreign content distributed on a Chinese streaming service, even if their content’s owners have invested into said streaming service, would still need to meet the local content and censorship regulations. While also needing to obtain the proper license for online publication, distribution, or monetization, depending on which type of content it is.

These regulations would be the same as locally produced content, in their need to obtain an official online publishing license before streaming the video, game, or literature content to Chinese online audiences.

NOTE. These VPN Pilot Zones will also include the publication of online games and online literature, but we will not be examining them in this article.

For Chinese streaming video companies like Tencent Video and iQiyi they are limited to how many foreign films, or series, they can purchase for their streaming service per year.

Along with the number of yearly acquisition licenses they have for the purchase of films and series to stream, each video service must have another special license to acquire those films on top of that.

Making the current process of entering the Chinese streaming market one that is under the control of the Beijing Regulators, and easily changed throughout the year.

It is unclear how, or if, this will change with foreign investment into streaming services of these VPN Pilot Zones, but China needs to see continued growth in its “Culture Industries”. With the stagnation of the China Box-Office streaming video holds a path for continued growth.


As we discussed in our previous article earlier this month on the recently added Chinese Superhero Sword Master to Marvel Comics, and how this character may be hinted at in the upcoming MCU film Shang-Chi and the Legend of the Ten Rings. Which may be leading to his own streaming series in China.

Due to an extended agreement between Marvel Entertainment and NetEase, the publisher of Sword Master in China via NetEase Comics. That would see NetEase create more Marvel Comics properties; digital comics, games (especially for mobile), and television series; for China and beyond.

Marvel’s Sword Master (right) Doctor Strange (left) published by NetEase Comics in China

It was the TV series and “beyond” the Chinese market aspects of the deal, that was most intriguing to us here at SilkCelluloid.com. Something that was completely overlooked by all other media outlets who had reported on this extended agreement.

Now with this recent announcement from the Beijing Regulators that will see a rollout over three years, allowing foreign investment into streaming services in China. Something that has been rumored for the past six-months to be in the works. This adds a new layer to the Marvel (Disney) / NetEase extended agreement and the television / beyond portion of it.

While the news of Marvel Ent. and NetEase extending their working relationship in China happening back at the end of May, it is reasonable to assume that executives at NetEase may have known the Regulators were on the path to allow the relaxing of foreign involvement into streaming services to occur.

Being a streaming service, just like any Hollywood box-office blockbuster, without a local Chinese partner Disney+ cannot officially operate in China. Teaming with NetEase to not only produce, possibly Sword Master original Marvel streaming series, but to bring original content over from Disney+ to China makes clear business sense.

As stated earlier this year in The Hollywood Reporter Disney+ with its more family orientated content is more poised to enter the China streaming market than say, Netflix. Who had a licensing deal with iQiyi, who let the deal laps after not being able to get much of Netflix’s Original Content passed Chinese censors.

China's Streaming Market Growth - Courtesy THR - Source: Media Partners Asia
China’s Streaming Market Growth – Courtesy THR – Source: Media Partners Asia

In 2016 Disney in a joint venture with Alibaba launched DisneyLife OTT a set top box that provided a wide range of content from cartoons to games from Disney in China, but after only 5 months it was shut down with no official reason by Beijing.

Re-entering China’s streaming market would not be as a monumental feet, as it would for its American competitors – especially Netflix. Who has already had years of difficulty entering, then staying in, the China’s growing streaming market.

It will be interesting to see how the fruition of this three-year action plan rolls out, and if any of the American streaming players do invest and through those investment, have any of their content enter into the Chinese streaming market. But, if any of them can make it, it will be Disney+ and the first streaming series it will most likely produce, as a test run, would be Marvel’s Sword Master in cooperation with its partner NetEase Comics.

For Part II of VPN Pilot Zones

Stay Tuned China Watchers!

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About the Author

Born and raised in the Missouri-Ozarks Ryan studied Film Production, and East Asian Culture, at the University of Kansas where he was a UGRA recipient that led him on a seven-year long, Journey From the West, to China. Where he worked with Warner Brothers, the China Film Group Corp. and the National Bureau of Statistics of China. Before returning to the States, where he specializes in Chinese Anime & Comics, China’s Box-Office, and Chinese entertainment-tech industries. He has a dog in China, Abigail, and a dog in the Arkansas-Ozarks, King Blue, who help ease his anxiety of suffering from the “Two-Dimensional Complex” that is trying to understand the Culture Industry landscapes of the Middle Kingdom.