China’s online video sector is a multi-billion dollar industry that dwarfs its European counterpart and which operates with sharply different business models from the emerging VoD sector in North America.
While the market leaders are native Chinese firms, interestingly, one U.S. company is making headway.
Jiaflix Enterprises positions itself as a hybrid of a Netflix subscription model and a transactional on-demand service. That makes it smaller and more specialized than Youku Tudou, LeVision or iQiyi, which earn most of their revenues from advertising.
Jiaflix president Marc Ganis estimates that revenues are now in the low tens of millions of dollars – but, significantly the company is profitable and growing.
“We have great relationships with the Hollywood studios and a joint venture relationship with M1905, the online arm of China Central Television’s Movie Channel. M1905 has digital rights to more than 7,000 Chinese movies and strong relationships with Chinese producers. That makes us a one-stop location for Chinese and international movies,” said Ganis.
“What we offer is a very cost-effective proposition, with a monthly subscription of only RMB30 ($4.90) per month and only RMB20 ($3.25) a month at the beginning,” said Ganis. He explains that the price point is low because of the need to get Chinese consumers into the habit of paying for films online.
The relationship with M1905 also gives Jiaflix the ability to distribute through IPTV, wifi and set-top-boxes. With M1905’s relationship with cell phone giant China Mobile, Jiaflix was able to offer “Transformers 4” to some 760 million mobile phone users.
Jiaflix is also championing a range of anti-piracy efforts in an effort to change consumer behavior. “Effective and efficient anti piracy is vital to causing Chinese consumers to pay for video content they have been able to get free through piracy,” said Ganis.
“Where we are heading is a sustainable long-term business that enables studios to count on earning ancillary revenues in China, not just treat them opportunistically,” Ganis said.