China’s video streaming market has grown rapidly in recent years, for good reasons. As mainstream media outlets are largely controlled by the government, video streaming platforms injected fresh air into the entertainment sector and caught the attention of consumers.
Live streaming platforms are different from operations such as LeTv or Netflix as the platforms do not produce content; instead, users come up with their own ideas.
They are also different to video website such as YouTube or Tudou as the latter largely offer pre-recorded programs.
China’s live streaming market has 390 million users, generating income worth 34 billion yuan last year, according to data from the China Internet Network Information Center. And the market is expected to hit 60 billion yuan by 2020.
Tencent-backed game-streaming platform Douyu, one of the major players with nearly 200 million active users, is reportedly planning an IPO in Hong Kong this year.
The platform has raised a total of 2.2 billion yuan capital after completing the D-round fund-raising last year. The company is expected to achieve an IPO valuation of nearly 50 billion yuan, similar to that of Tencent-backed China Literature (00772.HK).
Unlike traditional video websites, advertising only contributes to around 30 percent of revenue for these live video streaming websites. Up to 70 percent of their revenue is generated from virtual gifts. Viewers are able to reward content contributors with virtual gifts purchased with real money. Platforms in turn take a cut of each virtual item.
Interestingly, virtual gifts are voluntary. A viewer who gives no such virtual gift will have access to same content as those who spend 10,000 yuan in buying virtual gifts for the presenter. So why would people want to send contributors virtual gifts?
The psychology is probably the same as fans buying flowers and other gifts for the stars they like.
Successful live streaming hosts can earn a lot of money.
China’s top three live streaming presenters earned 18.33 million yuan, 12.97 million yuan and 10.21 million yuan respectively last year, according to data from a research agency. Their income is almost like that of a second-tier movie star.
It’s not difficult to see why they can make so much money. Suppose a top live streaming host has one million followers, and each one of them buys 0.1 yuan worth virtual gift per day, and the money spilt 50:50 with the platform, the host would earn 18.25 million yuan in one year.
Some hosts do have unique offerings. For example, there are game experts who live stream their gaming techniques with clear instructions for game fans to emulate.
But otherwise, the competition is cut-throat. Often, contributors have to to resort to the extreme to woo viewers. Some of them are trying to hype things up with obscene and dangerous feats. Nudity is also a common trick.
In one incident, 26-year-old Chinese rooftopper Wu Yongning died in November last year from a fatal fall off a 62-storey skyscraper while making a selfie video in Changsha.
“Virtual gift should take the blame for his tragedy,” a friend of Wu said.
The full article appeared in the Hong Kong Economic Journal on Jan 11
Translation by Julie Zhu
[Chinese version 中文版]
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