Web Video Fills Hole Left by TV in China

Posted on January 19, 2012


Beijing—government restrictions are driving young Chinese to turn off their TVS and turn on their computers. Advertisers and Western studios are right there with them.

China’s streaming- video sites once were derided by the global entertainment industry as homes of stolen movies and television shows. But many sites have cracked down on piracy and are offering original programming, as well as licensed Western movies and TV shows such as “Gossip Girl” and “Mad Men.”

As a result, ad revenue for Chinese video websites operated by Youku Inc., Tudou Holdings Ltd., Baidu Inc., Sohu.com Ltd. and others surged to 1.48 billion yuan ($235 million) in the third quarter, up 48% from the second quarter, according to Analysys International.

Some sites are starting to offer some premium content, charging Chinese consumers for each viewing or on a monthly basis. “People are getting used to paying for content,” said Gary Wang, chief executive of Tudou, which has about 12 million paying mobile subscribers.

Tudou, which gets 300 million visitors a month, has paid millions of dollars for exclusive rights to broadcast some Hollywood films, he said, though he didn’t offer specifics. In October the company began offering Walt Disney Co.’s “Cars 2” animated movie for 20 yuan, or about $3, a view.

Advertisers such as General Motors Co. are responding by buying banner ads, time before shows and in some cases helping to produce their own Chinese programming. Chinese online-video ad rates accelerated last year, rising 40%—50% in some cities—compared with a 25% rise in overall Internet advertising, according to WPP PLC’S Groupm Interaction ad-buying arm.

Youku teamed with GM last year to produce “Miss Puff,” an animated online series about a tech-savvy single woman in Beijing. Her handsome suitor drives GM’S Chevrolet Cruze.

“It’s a real business, a growing business, and it’s only going in one direction,” said Dede Nickerson, head of production and strategic development for the China arm of Sony Corp.’s Sony Pictures.

The rush has unleashed bidding wars for rights, leading to predictions of an industry shake-up. Last year Letv.com, a streaming-video website owned by Leshi Internet Information & Technology Corp., paid about 20 million yuan for the Internet rights to “Legend of Concubine Zhen Huan,” a Chinese-produced TV series about a young woman in the court of a Qing dynasty emperor.

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