Video websites in China are in a tight race for top-quality content as they seek to drive traffic and advertising into their portals. With competition becoming intense by the day, many players are revisiting their strategies and mapping out new plans. The companies, for the most part, hope to ride out the challenges, but admit that copyright issues remain a daunting problem for the industry.
Leading operators iQiyi and Youku Tudou have each prepared budget of about one billion yuan (US$169.67 million) for purchasing quality content this year, and plan to invest more on original content production, according to top officials from the two firms.
More than 5 million mainland users have paid for online films in the past three years, Youku Tudou’s senior vice president Zhu Huilong said at a panel discussion last month during the Hong Kong International Film & TV Market (FILMART) trade show. The industry’s revenue from paid films is growing by 300-500 percent on a yearly basis, he said.
However, copyright infringement remains a major obstacle for the development of paid online video services, iQiyi’s chief executive Gong Yu said at the same event. “It’s easier to deal with the large infringers, but harder to stop countless small content thieves,” he said.
Meanwhile, difference of opinion between the website and content providers from Hollywood on how netizens should pay for copyrighted videos, especially feature films, has also delayed the introduction of latest popular films to Chinese viewers.
“They insist on the pay-per-view model, but that’s not going to work in China because of inconvenient online payment methods for video content,” Gong said, referring to the situation where Chinese video sites are not authorized to charge directly via credit cards. Due to such inconvenience, the pay-per-view model doesn’t find too many takers in China.
iQiyi is not the only one encountering difficulties in striking content deals with foreign partners.
Feng Lan, deputy general manager of the business unit of National Base for International Culture Trade in Shanghai (NBICT), told EJ Insight in an interview that many domestic content creators and traders do not have enough knowledge about internationally accepted rules in copyright issues.
The NBICT is a government-backed association that plays an important role in serving China as a platform for cultural exchanges and innovation. Unveiled in 2011 in Waigaoqiao Bonded Zone, it has been organizing visits of domestic cultural product traders to overseas professional exhibitions.
Disputes sometimes took place because “the two sides didn’t even expect the same thing at the first instance when they signed the contract,” she said.
Feng revealed that her agency will hold an international copyright trade fair this year, partly to boost awareness on the general rules in international copyright trade, which will benefit the industry.
In the future, it plans to introduce credible and recognized arbitration institutions into NBICT, aiming to make it a third globally recognized arbitration center for copyright issues after London and New York. Arbitration mechanism provides faster and more flexible way to resolve disputes. She believes the moves would help firms get well prepared and enhance their bargaining power.
Rules of the jungle
Actually, iQiyi may also be a beneficiary from copyright-infringing activities in the booming but loosely regulated industry in mainland. According to consulting firm iResearch, China’s online video industry was worth 12.81 billion yuan in 2013, up 41 percent from a year ago. The figure is expected to reach 36.6 billion yuan in 2017.
In an ambiguous way, some mainland internet giants have connived in copyright-infringing content, coveting the web traffic driven by such content. Observers note that authorities are only concerned about preventing pornographic or anti-government content, and not really bothered about pirated material. Light punishment and long litigation process for copyright infringement cases make the situation worse.
In an interesting case in November last year, iQiyi did not show up in a high-profile campaign initiated by an anti-piracy alliance comprising all other top video websites. The unspoken reason: the campaign was against iQiyi’s controlling shareholder Baidu Inc.
The alliance filed more than a hundred lawsuits, involving compensation claims worth a total of 300 million yuan, directed at the internet search giant as Baidu was said to have intentionally provided huge amount of copyright-infringing videos through a multi-platform video site Baidu Player.
As the search engine with the largest market share in China, Baidu has dominated web traffic distribution through ranking the search results. Baidu gave higher rankings to iQiyi links if other websites have the same video resources, and for those that iQiyi didn’t have, Baidu would “steal” them to feed Baidu Player, Techweb reported in December 2013, citing an unnamed business insider.
Although Youku Tudou won 18 of the lawsuits filed as part of that anti-piracy campaign, the compensation was only 490,000 yuan, or less than 5 percent of its claimed loss, according to the Techweb report.
While concerned groups are applying pressure on the government to strengthen regulation, some see the complexity of copyright problems in the internet era as representing the need to refine the existing copyright licensing practices.
But until a sustainable market environment is established in the industry, it is the law of the jungle that will prevail — only the fittest will survive.
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