There’s a recent trend among video websites in China to spend enormous amounts of money to acquire TV and movie content. In the past, such content was usually streamed without license, and as a result many Chinese video sites became wildly popular when they first started. But now that many of them have IPO’d (or intend to IPO) they are trying to go legit with licensed content.
According to 163, citing the a Hunan newspaper, internet video sites are sparing no expense to keep movies and TV content so that their audiences don’t stray:
The price of a hot TV series could reach as much as 600,000 RMB (or almost $100,000) per episode. Just this year, at least five hot TV series sold over 20 million RMB, among which, the remake of the famous 1998 hit series Princess Pearl/ Huanzhu Gege sold for over 30 million RMB, with a total of 97 episodes. Sohu was the big spender on that deal, becoming the only online distributor of the series with this record price. This is especially impressive when compared with the 2006 big seller online Wulin Waizhuan, which sold for 100,000 RMB for 81 episodes.
However, expense is not a major concern for the buyers. Most websites have employed a dedicated team, providing professional advice on their purchases. And this gives websites a new way of marketing. Profit is assured. In the first quarter of 2011, the profit of Chinaʼs online video business reached 660 million RMB, while at the same time last year, the number was only 314 million RMB. (my translation)
An Alternative to buying
If the price continues to grow at this pace, it may bring an end to the era of free online TV series in China. Recently we’ve also written about how many video sites are beginning to produce their own original content themselves. Youku stands out with the popular short film The Ultimate Winner, its own animated web series, and even more content on the way.
As it always has been, the Chinese video space will be an interesting one to watch. Here’s how the Chinese market share is divided right now, the numbers courtesy of 163:
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Thanks for sharing, Kai! Very insightful. I got to agree with the UGC part. That said, YouTube is currently also getting “original content” by partnering with third parties — getting sports (Cricket and Badminton) and Bollywood content. but of course, youtube has a better mix between ugc and paid content. Like you said, China’s video site industry will emerge a winner soon. By then we probably can see more ugc, since there are only one or two platforms left to play with.
Ku6 is definitely on the brink, especially with serious internal conflict.
thx for the post and reply! my comment was narrow, incredulity at 163′s absurd statement that ‘profit is assured’.
As to your larger question, I think paying for a famous show is more like buying a product than it is building a product. When Sohu HDTV buys the rights to Gossip Girl or a popular Chinese show like Supergirl, how loyal are those users that watch the show for free? If Youku or Tudou or Qiyi or 56.com bids more for the rights to the show the next year, what is the user incentive to stay with Sohu? I think there’s a danger that a site becomes just a pipeline with no user loyalty, similar to telecoms when faced with something consumers actually want like an iPhone.
So to reduce costs and differentiate, video sites are now pursuing ‘alternatives to buying’ as Chen’s post discusses. That means most are now producing their own original professional content. Even better of course is user-generated content (UGC), which is the primary source of content for YouTube. UGC still lags behind in China, though Tudou is trying to make it work.
As the graph in the piece shows, the Chinese video market is also far more fractured than the US, where YouTube holds a dominant share, about 70% I believe. I think we’ll also see a lot of losers and consolidation in this space (e.g., I think Ku6 is on the brink).
Talk soon!
hey Kai. Thanks for the comment. Indeed, all video sites are losing money. Even youtube is losing money w/o the help of google. I’m not sure if you will agree. but in the tech field, it is a lot about building the product first. it’s always a product first, money later culture. I see all video sites in china doing the same, bring in quality videos to attract more users. it’s the product that matters, at least for now when they have money to burn!
costs are definitely soaring. but where is 163 getting its numbers on ‘profits’??? Almost all of these sites are LOSING money in a big way. If anything, it’s losses–not profits–that are assured.