LOS ANGELES The government-run China Movie Channel will launch an online service like Netflix Inc (NFLX.O) in China this year, promising a big new revenue source for Hollywood from streaming its films and TV shows to subscribers in the world's most populous nation.
The new service is set to open in the fourth quarter, according to its backers, who say they have signed their first content agreement with a major Hollywood studio.
Hollywood studios have been largely excluded from doing business in the nation's most populous nation by government-imposed import limits.
Viacom Inc's (VIAB.O) Paramount Pictures will be the first studio to provide movies and TV shows to the movie streaming service, due to start later this year, said Longei Liang, managing director of the Chinese company's existing "M1905" movie-streaming website.
The as-yet unnamed movie service, to be announced later on Thursday in Beverly Hills, Calif., is also negotiating similar agreements with Metro-Goldwyn-Mayer Inc MGMYR.UL and other studios, Liang said.
China Movie Channel plans to create the new service with Jiaflix Enterprises, a group that includes former Columbia Pictures chairman Sid Ganis.
Jiaflix, a play on "Jia," which means "family," expects to soon add content from more studios, said Marc Ganis, a cousin of Sid Ganis and a Jiaflix managing director.
"This new venture will bring the best that Hollywood has to offer to viewers in China," said Sid Ganis. "It represents a great opportunity for Hollywood to increase its exports to China and enhance cultural cooperation between our two nations."
The new service's backers hope the low-cost and mobile streaming model will help Hollywood studios wring more revenue from Chinese viewers.
China Movie Channel, which is regulated by the State Administration of Radio, Film and Television, is the country's largest TV buyer of international movies and has deals with all the major studios. Its website, M1905.com, offers 6,000 Chinese-language movies.
The 5-year-old M1905.com - so named because 1905 was the year China began making movies - has 4 million unique visitors, 3 million registered users and about 16 million daily page-views.
Hitherto, China has imposed strict controls on the Hollywood shows allowed within its borders, limiting the number of movies screened in theaters and confining broadcasts to cable channels marketed primarily to an expatriate population.
Rampant piracy - with DVDs of blockbuster films sold widely for often as low as $1 apiece - has also curtailed the expansion of Hollywood content in the world's second-biggest economy.
Netflix, which helped popularize online viewing of movies and TV shows in the United States, licenses movies and TV shows with upfront payments. It charges a flat monthly fee for on-demand streaming.
M1905.com will similarly be converted into the new subscription service and will stream movies to subscribers through computers, Internet-connected TVs and mobile devices.
Subscriptions are likely to be priced at under $10 a month to attract customers. Newer films can be purchased individually for on-demand viewing.
Ganis negotiated the first agreement with a major studio - which he declined to name until a formal announcement was made - with his cousin Marc and Chinese businessman Kenny Huang. Huang founded sports consultant Sportscorp China in 2002 with Marc Ganis.
"We are delighted to make this announcement with our partners at Jiaflix, said Longfei Liang, M1905's managing director. "China has a long and storied history in films. New media distribution of films is the future."
(Edited by Edwin Chan, Greg Mahlich and Andre Grenon)