More than 200 people congregated in the loft of a building in Shanghai last month to watch videos. But this was no film festival or social outing.

The event was staged to allow students and other amateur video makers to showcase their creative talents to Websites, TV stations, telecommunication operators, advertisers and other commercial companies which are eager to cash in on China's booming Internet video market.

"It's been a long march for the industry in past years, but now we feel we are close to some success," said Wang Wei, chief executive of Internet video player Tudou.com, which organized the event. "I never doubted the opportunities presented by the Internet, and now it's time for both podcasters and Websites to cash in."

Tudou hasn't been profitable since it was founded in 2005, or for that matter, other Websites too.

Still, Tudou, Youku.com and other Chinese YouTube-style Websites have been attracting attention and some venture capital, even if the investments have yet to yield much profit, industry analysts said.

In the first quarter, the Chinese Internet video market revenue, drawn mainly from advertising, was 98.10 million yuan (US$14.43 million), a surge of 111 percent from a year earlier, according to Analysys International, a Beijing-based information technology consulting firm.

"The online video market income hasn't been influenced by the global financial crisis, and advertisers recognize the value of the market," said Liu Tong, a researcher at Analysys.

At the loft event, podcasters (a word derived from combining "broadcaster'' with "iPod'') spoke about the video clips they produced and had the chance to talk directly with sponsors who may buy them.

"We were held back for several months by a lack of capital, but now we are going into it big time," said Yuan Siqi, a sophomore of the Shanghai Theater Academy China, who represented a team of students bent on producing an art film entitled "Tree (Guoshu)" for online broadcast.

The team negotiated with several potential sponsors during the gathering, according to Yuan.

Online spending

China's online advertising spending will grow between 30 percent and 40 percent year on year in 2009, according to Hans Yu, chief executive of CR-Nielsen, a research joint venture in China's Internet market.

Online spending by consumer brands and cyber-game operators is increasing. General Motors, Nike, Coca-Cola and other big brand-name companies are already advertising on video Websites.

"The quality of the videos has improved greatly. It makes you not only laugh but also think," said Tudou's Wang.

Between 30,000 video clips and 50,000 video clips are uploaded to Tudou every day, and the site has about 40 million users.

During the loft event, Tudou presented awards to 16 of the 2,000 video clip entries. The winners covered a wide range of subjects, from the life of poor children in India to the relationship between Japan and China.

"The products are full of interesting ideas. It's fresh air to me," said Lu Chuan, the director of the "City of Live and Death,'' or "Nanjing Nanjing,'' as it is known in China.

Zhao Haicheng, assistant to the general manager of China Film Group Co, said China's biggest film production and distribution firm will expand into the new media sector this year.

China Film will invest up to US$1 million for each video clip, which is normally about 10 minutes long.

In 2009, the firm will launch 150 online video programs and 150 programs on mobile phones, Zhao said.

Video Websites are expected to become another strategic channel for traditional media giants, including TV stations, film distributors and telecom operators, industry insiders said.

"Our target is to become an online HBO," Wang said. "Users can watch the content they like and video clips made for the Internet target people between the ages of 15 and 30, who often surf online for several hours a day but seldom watch TV."

A recent government policy gives impetus to domestic video makers.

The State Administration of Radio, Film, and Television announced three months ago that only content fit to be aired on Chinese television or in cinemas could be broadcast online.

Prior to that, Chinese video Websites were dominated by popular overseas TV series such as "Prison Break" and "Lost," which became the hottest clicks on the Websites.

Both Tudou and Youku declined to comment on the policy change. "It's time for us to work on creative products with 100 percent effort," said Long Yuancheng, a senior university student who has produced some video clips about the World Cup.

3G gold mine

Another producer with the online name Cang Tiange often produces video clips based on popular online games such as "World of WarCraft."

Long said he is seriously considering becoming a professional podcaster after graduation, but that will depend on income prospects, such as advertising-revenue sharing.

Another potential gold mine for video Websites is 3G. Small wonder that China Telecom and Nokia officials were among those who attended the loft event.

The 3G mobile communications network gives users high-speed services online, such as film downloads and video conferencing.

In January, China issued 3G licenses to China Mobile, China Unicom and China Telecom. All three have started providing 3G services in the Chinese mainland.

"Video content is a key application of 3G," said Lv Tingjie, professor at Beijing University of Post and Telecommunications.

The relatively short video clips marry well with the formats of the Internet and mobile phones, one analyst said.

Tudou is talking with handset makers to put its Webpages inside phones, like YouTube in Apple's iPhone, Wang said.

(Shanghai Daily May 27, 2009)