Websites vie for profit from free online video streaming
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The online video industry in China is a tangled web, and it may take some time to unravel the chaos and put the business model onto a stable footing.
Consider these main elements:
Internet users want to see the latest films and TV series, but they don't want to pay to watch them. The government is trying to crack down on unlicensed and pirated content, but the wheels of progress move slowly.
A glut of providers has invaded the market, leading to suits and countersuits over who is licensed to show certain programing and who is not.
What's an ordinary online video viewer like myself to make of all this?
"Existing online videos fall into three categories: licensed movies and TV series offered by producers to be screened on the Internet; user-made videos, most of them by amateurs; and content that is unlicensed," said Alan Yan, CEO of the Shanghai-based online advertising company Ad China.
"Most advertisers are willing to run ads on the first kind of content but aren't very interested in the second category," he said. "Very few advertisers are willing to put ads on Websites that carried unlicensed content, for fear of getting into disputes concerning intellectual property rights," he added.
Chinese online video watchers are so used to free content on the Internet that they have come to take it for granted. It won't be easy to convince them to open up their pocketbooks and pay for what they watch.
That hasn't stopped more and more companies from trying to squeeze into the market. Most Internet users, myself included, have trouble differentiating among the various players. Their Websites often have similar designs and even similar names in Chinese.
Licensing fees for domestic TV series have risen fivefold in the past two years as the number of players swelled, according to estimates of industry watchers. The fees for some popular series, especially those featuring well known performers in leading roles, cost more than 10,000 yuan (US$1,464) an episode.
Some content providers are seeking to recoup the costs by seeking compensation from rivals in licensing lawsuits. Others are trying to charge users for every film watched on the Net.
"Whether users are willing to pay for online videos depends on how attractive the content is," said Yan.
I consider myself a pretty ordinary film viewer, and I loathe paying Websites to watch movies because they want to charge users to see content that is not licensed by film studios and TV producers, despite their claims that the videos are all licensed. After all, the Websites have already lined their pockets with all the advertising income without paying any licensing fees.
It's not because I am particularly stingy. I once paid for several albums on Apple's iTunes music store because they were too old to find in CD shops and weren't on any file-sharing sites.
It's the Oscars time of the year, which reminds us how eager movie fans are to see the winners and all the rest of the nominated films.
Normally it takes six months or more for a foreign film to be vetted and approved for import by government authorities. Film lovers constantly complain about the lag that prevents them from seeking high-profile movies in local theaters soon after their release. Then, too, Chinese censors sometimes snip out parts of films.
Download pirates
Given all that, it's not surprising that "pirated" copies of these films appear long before the movies officially arrive. They are usually downloaded from overseas servers, with subtitles often provided by Net users themselves, then shared in Chinese file-sharing sites.
The war of words over licensed versus unlicensed content is riddled with anomalies.
A leading online video provider and developer of China's most popular download tool claimed it has stopped users from uploading videos since February and will eliminate most of the existing unlicensed content by the middle of the year.
Yet a conspicuous banner on its front page invites users to a section that provides online viewing of nearly all the films nominated for the Oscars this year.
At the same time, who wants to watch popular TV series if you have to endure the long and dull commercial breaks? If you type in the name of a popular Hong Kong TV series on a search engine, at least three domestic Websites appear, offering all of the episodes. Small wonder that people would prefer to watch the commercial-free versions by just opening their laptops. Net surfers don't particularly care if what they watch is licensed or not.
"New regulations issued by the State Administration of Radio Film and Television tighten rules on TV and radio commercial breaks, reducing them by about 20 percent," said Yan. "That's likely to benefit Websites that provide online streaming of TV programs."
Some domestic Websites, about four or five years ago, experimented with user-pay online video viewing, according to Tang Yizhi, an analyst with Beijing-based Internet research firm Analysys International.
"But as more players entered the field, that approach was overtaken by free viewing plus Web page advertising," she said. "That's been the mainstream business model, but competition is heating up and licensing fees have jumped."
The current campaign to eliminate unlicensed content has put the squeeze on some video sites that don't want to lose users but don't have the money to pay licensing fees, said Tang.
"It takes a while for actions by film studios and government departments to have any impact on the problem of unlicensed foreign movies," she said.
"I predict that within two or three years, major disputes are likely to be settled, affording us a clear view of who are the winners and losers."
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