​Quick fix for Quickflix? Streaming service looks to buy Chinese content company

Amidst declining profits and falling customer numbers, Quickflix has made a bold bid to revive its fortunes, announcing its intention to buy out a Chinese film and TV company to distribute in China and beyond.

The company today confirmed it has entered a memorandum of understanding with an unnamed "Shanghai-based film and television company" with Quickflix signalling its intention to "acquire" the business. The result would be a combined "global streaming platform for Chinese film and TV content into China and international markets."

It's an interesting move for a company that has been struggling to make headway on local Australian shores, with a string of weak results announcements pointing to a company in decline. But as the Australian streaming space heats up, the Asian market could well be the lifeline that Quickflix is looking for in a bid to diversify.

Quickflix carefully avoided naming the company it was in talks to buy, only saying that it "produces original Chinese language film and TV, participates in co-production in China and international markets and has a slate of future production inlcuding a co-production with a US studio."

For a company that currently has less than a million dollars on its books, Quickflix also noted that its Shanghai-based counterpart "is profitable and generates free cash-flow" and that, combined, the companies would have "a significantly improved financial outlook."

The announcement comes after Quickflix entered a trading halt last Thursday pending an announcement that it said "may result in an acquisition." The subsequent deal is still subject to regulatory approval, with the final pricetag set to be negotiated after the companies complete due diligence, with further news on the partnership expected before 20 August.

Quickflix has been battling to maintain share of voice and customers in recent months as Australia's content streaming market has grown increasingly competitive. Rival local service Stan launched on Australia Day this year, while Foxtel has tightened up its Presto SVOD service and dropped prices on its pay TV offering.

Quickflix announced a partnership with Foxtel in May to deliver Presto services through its platform, however the deal has since collapsed. According to a statement from Foxtel, the deal was subject to a series of commercial conditions, but Foxtel was "disappointed that [Quickflix was] unable to meet these requirements." Quickflix has confirmed that the deal has been "terminated."

But potentially the biggest threat to Quickflix is the rapidly growing Netflix platform. While the company first welcomed the arrival of another '-flix' in Australia, saying Netflix would help to grow interest in streaming across the board, Quickflix has since owned up to losing customers to its rival.

In the company's most recent quarterly statement, Quickflix reported a 14 percent quarter-on-quarter decline in total customer numbers for the three months ended June 2015, equating to almost 20,000 users leaving the service, with trial customer numbers dropping by a quarter.

"Pent-up demand for Netflix in particular caused a sharp decline in customers early in the quarter following its launch in Australia and New Zealand," Quickflix said in its quarterly update.

The company also blamed heavy advertising of competitor services and free subscription deals for its losses, saying that this kind of activity had also resulted "in a lot of choppiness and some confusion in the market place."

Quickflix's bottom line has also been hit, with revenues from paying customers falling by 15 percent and cash reserves dipping below AU$1 million in the most recent quarterly results -- less than half of what they were at the end of the 2014 calendar year.

Quickflix did not respond to a request for comment.