The transformation of China’s video market is creating opportunities for new specialty players, as well as driving up content acquisition prices, says Thomas Hui, COO at CMC Holdings.
Those trends are informing a portfolio consolidation at CMC Holdings’ parent company, China Media Capital. CMC has been a pioneering media investor in China, and includes Warner Bros. and WPP among its backers.
“The big three OTT players (Alibaba’s Youku, Tencent Video, and Baidu’s iQIYI) are all doing well, increasing subscriber numbers, and advertising revenues. And as a consequence, all are investing more in content,” said Hui, speaking Wednesday at the APOS conference in Indonesia.
“Specialty and short form content platforms are gaining traction both with viewers and in the capital markets,” said Hui. Leaders in the new sector are: Bilibili, which is focused on animation content; PPTV, which specializes in sports and is actively adding to its collection of rights; and Douyu TV, which is dedicated to games and the fans that watch the top players. Bilibili recently completed an IPO on the NASDAQ stock market in the U.S. Its current market capitalization is $3.11 billion.
Hui said that CMC’s portfolio is consolidating in three areas: content production; specialized online platforms; and live event management. CMC now has stakes in Daylight Entertainment, TVB, The Voice of China in content production; speciality OTT platforms including Bilibili, and Pear Video; and CMC Live, Legoland Park China in the live events sector.
“The Baidu-, Alibaba- and Tencent-backed OTT companies are edging aside the traditional TV companies,” said Hui. “They have broad reach, and they are producing premium content in order to drive conversion to subscription. The prices they are paying per episode is RMB10-15 million ($1.6 million to $2.4 million), that is two or three times what they were spending just two years ago.”
That content remains largely China-focused and has not developed much of an export market to date.
“There must come a day when this happens. It has not happened as quickly as we wanted, despite better production values in China. China’s internal growth has been a distraction,” said Hui. “And incumbent forces are strong. We still have an older generation of Chinese artists. We need a new generation Jackie Chan or Andy Lau in order to achieve mass (international) appeal,” Hui said.