After merging into one company last year, Youku Tudou (NYSE:YOKU) further established itself as China’s top online video business with its two sites. Combining user-generated videos and licensed movies and TV shows, Youku and Tudou collectively spent over US$100 million last year on securing the rights to an array of Chinese and overseas streaming content. It’s a significant investment (with studios like Sony Pictures and Warner Bros) in capturing the attention of China’s web users – and it’s a treasure they need to protect from web pirates.
In this battle against piracy, Youku Tudou is up against illegal downloading sites that rip licensed content from the company’s sites, and rogue video streaming sites that seek to profit from uploading these rips. And not to forget the ample number of rival Hulu-like services in the nation, like the fast-growing Tencent Video, Sohu TV, and Baidu’s iQiyi (which recently made a major acquisition to expand even further). Yes, they also pay for the rights to content – thereby pushing up the price of licensing – but I get the feeling that they all keep a keen eye on each other.
Overseeing all this for Youku Tudou is Carl Lu, the company’s legal supervisor and leader of the anti-piracy team. Carl tells us that as the site has grown to 150 million daily views from mobile devices, the pirates are going mobile as well. That’s a phenomenon we’ve also seen with Chinese authorities struggling to take down mobile-only porn sites. He explains:
Ever since the establishment of our anti-piracy team in early 2012, […] we have seen a quick expansion for anti-piracy fronts from mainly PC to include mobile devices. Additionally, the fast growth in small piracy video sites is astonishing. The team in July and August 2012 recorded around 500 to 600 such video sites, yet the latest monitoring – now we have to outsource to a third-party agency – in mid-April reported as many as 1,995 such sites, many of them not registered [in China], or with their servers overseas.
The pirates are going mobile
Carl points out that Youku Tudou’s “content cost in 2012 was $118.3 million, representing 41 percent of our consolidated net revenues.” The anti-piracy team is there to protect those assets. That team, we’re told, expands as needed, and also loops in outside agencies for added support. Exclusive licensed content is inevitably the most closely guarded:
As a standard procedure, the team will issue warning letters to our contacts, to inform them the upcoming exclusive copyrighted content we carry. Once we detect any [copyright] infringement, we will send them take-down notices. Attorney letters if no response. If we need to prepare for more serious steps, we will take notarized evidence. The last resort is an official lawsuit.
The Youku and Tudou sites have to monitor what their own users are up to because an individual uploading, say, another site’s licensed content in bite-sized chunks will cause problems. Carl says, “For that, we have an in-house fingerprinting system, and another third-party system to detect pirated content in addition to our team’s manual review.”
Despite China’s top web companies pushing forward licensed content – like Baidu’s revamped music streaming portal, and many of China’s top video streaming sites converting their movie and TV serials content into kosher copies – there’s still plenty of offline and online piracy in mainland China. From the country’s notorious DVD shops, to P2P platforms like Xunlei, to blatant direct download pirates, there are still plenty of dodgy ways of watching a new movie or an entire season of a popular TV show.
Last month, authorities took down two of China’s biggest media piracy sites, conveniently enough on World Intellectual Property Day. But one of then, YYeTs, is now back online.
Chinese TV dramas make up 60% of traffic
Despite the challenges, it’s clear that web video is now a crucial draw for major web companies in China. A total of 4.1 billion hours of online videos were watched in one month last summer, and that number has plenty of room for growth as smartphones gradually become more ubiquitous across broader swathes of China.
Of all the licensed content on Youku and Tudou right now, 60 percent of total traffic on the sites stem from Chinese TV serials. US dramas – I see that The Vampire Diaries is the hottest right now on Tudou – represent, Carl says, “one of the fast growing categories” but still only account for three percent of traffic.
While much of the streaming is free, some require a fee as part of the Youku Premium package. That service has seen two million transactions since its beta launch, but that’s a figure which hasn’t been updated by the company since last year. While the transition to mobile seems to be going well for Youku Tudou and a few other such sites, it’ll be tougher to get consumers to pay for the latest movies or TV shows. In order to capture the fast-growing mobile user-ship, Youku is launching mobile ads this month.
Youku Tudou plans to ramp up its battle with the web pirates even more this year, so we’ve not heard the last of this fight.