Part of what’s hurting online video companies is content costs. As sites struggle for exclusive rights to the most popular content — various TV serial dramas, mostly — prices are pushed up. And up and up, and then up some more.
Recently, Sohu’s video service broke records by spending more than 30 million RMB — that’s about $4.6 million — on the web broadcast rights to 30 episodes of the classic “Ups and Downs”, a serial drama. That’s not an anomaly; earlier this year the rights to 98 episodes of the “New Princess Peach” drama also went to Sohu, for 30 million RMB. Other companies are spending similarly astronomical sums to get their hands on valuable content; Youku, Leshi, and PPS have all spent more than 200 million RMB to secure the web broadcast rights to a single show.
What’s especially remarkable is how much prices have gone up. Just three years ago, web broadcast rights for a single episode of “Ups and Downs” cost 10,000 RMB, or about $1,500. Given that Sohu just paid over 1,000,000 RMB/episode for the rights to that same show, that means web broadcast prices are over one hundred times what they were three years ago.
In this market, only companies with cash to burn — either as the result of an IPO or because they’re affiliated with a larger (and profitable) web company — will survive. But even the market leaders are branching out in new directions, too. Youku has been commissioning original content from films to TV serials on its own for some time now, and several of its products have met with great success. Tudou and several other video sites are also attempting to move into creating original programming, though none have yet been able to rival Youku’s success in that field.
Full disclosure: I do occasional freelance work for Youku.