SVOD specialist Mubi, which offers subscribers a rolling choice of 30 art house films at any one time, started streaming movies at the same time as Netflix, in 2007.

With 100,000 paying subs, Mubi is far smaller than its contemporary, although it leads in one area: entry into China, via a JV with local firm Huanxi Media announced in January.

The JV, majority-owned by Huanxi, will source its films locally, while adopting the same technology and product design as Mubi’s global offering.

“We have a completely Chinese mandate,” Mubi’s founder and CEO Efe Cakarel announced, speaking at this year’s APOS conference in Bali.

Huanxi is run by veteran Chinese film producer Dong Ping, who sold a 60% stake in his last company, ChinaVision Media, to Alibaba for around US$800 million in 2014.

The deal comes as the Chinese government tightens controls on OTT distribution of foreign content. In March and April, Apple and Disney suspended local versions of their online services, iTunes and DisneyLife, which both launched last year.

Mubi China will be a different kind of business, Cakarel said, establishing China as the third market where Mubi has a dedicated operation, after the US and the UK.

Huanxi is paying US$40 million for 70% of Mubi China, which is slated to go live later this year. Mubi has the remaining 30%, in exchange for licensing its streaming technology and IP.

Huanxi has also invested another US$10 million for an 8% stake in Mubi itself, valuing Mubi at US$125 million.

Before the Huanxi deal, Mubi had secured about US$25 million in funding.

The tie-up provides useful capital and market access as Cakarel, a former banker with Goldman Sachs, looks to expand Mubi’s content offering and reach, including via potential tie-ups with pay-TV and broadband platforms.

A SLOW START

Cakarel’s company struggled in its early years, as executives tried out different ways to buy and sell a broad collection of movies online.

The business started to gain traction three years ago, after Cakarel and his team hit upon the idea of offering less choice: 30 movies at any one time, updated with one new film per day.

The move, which offered something different to studios and consumers, brought down licensing costs while sidestepping design challenges around recommendations and discoverability.

“That created the company,” Cakarel recounted. “That introduced a very clear differentiation to the big guys, especially Netflix.”

The films on offer are currently handpicked for the US and the UK but set by algorithms elsewhere, using data from a free social layer developed around the core service, as well as per-country rights that Mubi owns.

Now Cakarel wants to ramp up funding, followed by subscriber numbers, to build on current momentum.

“In 2017, once we start proving the business model, we want to go raise significant growth capital, 100 million-plus, to really start scaling the business,” he said.

Cakarel is open to large strategics as well as institutional investors buying into Mubi, which has mainly raised money from individuals so far.

He is also looking to land an additional US$30-50 million for movie production, helping secure fresher content for Mubi.

For the most part, the service relies on older films, especially in markets where big studios have large output deals with local pay-TV operators.

At the same time, Cakarel wants Mubi’s subs base to expand exponentially, from around 100,000 today to two to three million within the next three years.

“A very ambitious target, but we know what we are doing,” he told APOS attendees.

“We haven’t just launched our business 15 months ago. We can see the path to growth with our established presence.”