China’s digital cloudburst

The local entertainment biz looks to ramp up online content delivery

Digital delivery is one of the hottest topics at Hong Kong’s Filmart, as more Chinese auds use their cellphones and tablets to access content. China has a population of 550 million webizens and the number of mobile Web users was up nearly 18%, or 64.4 million new users, to reach an impressive 420 million total users last year.

One of the big panels at Filmart will examine the prospects for online distribution of entertainment content, and the big domestic players are increasingly bullish on the outlook.

Gong Yu, CEO of Qiyi.com, the video channel of China’s dominant browser, Baidu, reckons digital media is completely changing the way Chinese people receive information and video content — and fast.

“Mobile has shown explosive growth in the past two years, and it will keeping growing further,” Gong says. “Tablets and smart phones will play an important role.”

For the industry, there is a huge potential market for digital delivery, especially for mobile video, where traffic has been steadily increasing for the past two years. By the end of 2011, the traffic was less than 4%, rising to more than 5% by Chinese New Year and then 15% by last summer, up to one-third of all traffic by January.

China’s biggest online video company is Youku Tudou, which was formed by last year’s merger of China’s two dominant video-sharing sites.

The merged company is focusing on providing licensed content, which is good news for Hollywood and other overseas shingles distributing content in China.

Sony, WB, DreamWorks, Paramount, 20th Century Fox, Disney, NBCUniversal and Lionsgate have all signed deals with Yukou Tudou.

“This year should witness an explosive growth for SVOD,” says Zhu Huilong, VP of movies & corporate development at Youku Tudou. “After a few years of digital distribution in China, especially after the nurturing and growth of (pay video on demand) by the industry, Chinese viewers have come to adopt the habit of paying to view legit movies online.” Zhu notes the growing popularity of its classics library, and expects the number of paying users to rise in 2013.

The online movie channel offers additional content that set it apart from pirate sites, such as Youku Tudou’s exclusive “Life of Pi” documentary made in partnership with Fox, while “CZ12” helmer-star Jackie Chan hosted an extended clip about that film’s shooting.

With B.O. hit “Lost in Thailand,” Youku Tudou produced original material related to the viewers and had almost 80 million views in total.

Qiyi works with shingles to produce its own video content, including TV drama skeins — a big draw in China, as well as short films and entertainment shows.

“The profit comes mainly from advertising, and there is a small number of paying subscribers,” Gong says. “And every party can benefit from the income from advertising.”

The biggest online players

  • Yukou Toudu is China’s biggest online video company, formed after online giant Yukou bought No. 2 Tudou last year.
  • Both Youku and Tudou started out copying the business model of YouTube, which is banned in China.
  • Qiyi.com is the online video sub sdiary of China’s biggest search engine Baidu. Launched in April 2010, Qiyi shows films, skeins, docus, toons and variety shows.
  • LeTV (Leshi), a Beijing-based video and movie streaming site. It has more than 50,000 episodes of soap operas and more than 4,000 movies.
  • CNTV.cn is the website of China’s national broadcaster CCTV, and is a multi-language, globalized and multi-terminal online video platform. Its content includes news, finance, sports, entertainment, pics, skeins and docus.
  • Tencent, which owns QQ, China’s largest instant message service, operates its Tencent Video portal at V.QQ.com.
  • TV.sohu.com is the online video unit of the web giant Sohu.com.
  • Ku6 Media, focuses on user generated content, and was deemed the most influential video website in terms of user-generated content in China in a research report published recently by KY-Research.com. PPTV.com offers live streaming and VOD of skeins, pics, drama, sports and news.

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