Online Video Sector in China Heading for Profit by 2019 (Study)

China’s heavily loss-making online video sector could finally break even by 2019, according to a new report by investment bank JP Morgan.

The report describes an oligopoly consisting of Chinese companies iQIYI, Youku Tudou, and Tencent Video – backed by Internet giants Baidu, Alibaba, and Tencent, respectively – and operating unchallenged by foreign players.

The report says that a massive structural change in the sector is currently underway. The three conglomerates and their video subsidiaries are all shifting from a content-acquisition model to one increasingly based on producing, investing in and distributing original content.

That shift requires continued heavy investment, but paves the way for growth in subscriber numbers and for the conversion of an advertising-supported business model into a subscription-driven one. JP Morgan says that there are some 520 million Chinese users of online video but only 60 million with paid subscriptions across the three leading platforms at the end of 2016. The report estimates that the number of paid subscribers could rise to 234 million by 2020.

While Baidu, Alibaba, and Tencent are the three dominant players in the Chinese Internet sector and are often lumped together, the report makes sharp distinctions between the strengths of their video operations. It describes Baidu’s iQIYI and Tencent’s Tencent Video as leaders, while Alibaba’s Youku is a “chaser.”

Significantly, the bank forecasts different timelines for each of the three video services to break even. It predicts that iQIYI will get there first, in 2018, followed by Tencent Video in 2019 and Youku in 2020. The sector as a whole would reach the break-even point in 2019.

Popular on Variety

More Digital

  • Ann Sarnoff Warner Bros

    Ann Sarnoff Formally Takes Reins of Warner Bros. as CEO

    The Ann Sarnoff era at Warner Bros. has begun. Sarnoff formally took the reins as Warner Bros. chair-CEO on Thursday, two months after she was appointed to the post. Sarnoff told employees in a memo that she has been impressed by the company’s track record during the past year amid a period of upheaval for [...]

  • Martin Clunes - Manhunt

    YouTube TV Adds Subscription Options for AMC Networks' Acorn TV, UMC

    Google’s YouTube TV now offers two more add-on channels to subscribers, under an expanded pact with AMC Networks: British TV service Acorn TV and UMC (Urban Movie Channel), which features a selection of black TV and film titles. Acorn TV’s add-on channel is now available via YouTube TV for $6 per month and UMC is [...]

  • homepod-white-shelf

    Apple Said to Prep Cheaper HomePod for 2020

    Apple is getting ready to introduce a cheaper version of its HomePod smart speaker in 2020, Bloomberg reported Thursday. The company is also working on a new version of its AirPod headphones for next year, according to Bloomberg. Apple didn’t immediately respond to a request for comment. The new version of the HomePod is said [...]

  • Eminem Publisher Sues Spotify, Claiming Copyright

    Eminem Publisher Sues Spotify, Claiming Massive Copyright Infringement

    Eight Mile Style, a publishing company that holds administration rights to Eminem’s early catalog, filed a major copyright infringement lawsuit against Spotify late Thursday, claiming that the streaming giant has no license to host about 250 of Eminem’s songs, while also taking aim at the Music Modernization Act, the federal law enacted last year to [...]

  • iQIYI headquarters building in Beijing

    China’s iQIYI in Talks for Indonesia Expansion

    Chinese streaming firm iQIYI is in negotiations to expand further into Southeast Asia through a venture with Indonesia’s Media Nusantara Citra. iQIYI announced its first step outside Chinese-majority territories in June, when it revealed a linkup in Malaysia with pay-TV leader Astro. It also operates in Taiwan. In April, the company said that it planned [...]

More From Our Brands

Access exclusive content