How Could Online Video Companies Better Survive? (CRI)

28 May 2011 8 h 39 min 15 comments

By Xu, in CRIENGLISH.com (27/5/11)

“What Hualu has done, which is really setting a lead, is the way forward. For example, they signed agreement with Amazon and Dangdang which allow consumers to buy TV and movie products produced by Hualu on their websites.

And theyhave also formed partnerships with  social networking sites. So I do see this sort of emerging business model being the norm in order to for these companies to remain viable.”

The recent announcement made by video website giant “ku6.com” to lay off 20 percent of its staff, due to a restructuring of the sales team, has provoked thinking about the financial viability of online Chinese video companies. The company is now also reporting quarterly losses. An earlier report says that after going public last year, the web station “ku6.com” experienced a deficit of 51.5 million US dollars.

Until now, many industry insiders considered online Chinese media providers like Ku6, Tudou and Youku as a way of continuing to make profits. Mike Bastin, a Marketing and Management teacher at Tsinghua University, says there are a few reasons why the industry is struggling to make a profit. “First and foremost the industry only attracts five percent of online industry advertising spending, and as we know many websites make their money through advertising. Secondly, there’s still intense competition. We have Youku, Tudou and Ku 6. And now we have state-owned Hualu entering the ring. And finally, Chinese users still don’t pay for content. It’s quite easy to access pirated content.”

Charging a reasonable price for people

Since it is a fact that protecting “intellectual property rights” is still very difficult in China, the Tsinghua University teacher suggests a new business model, and cites Hualu’s success as an example. “We see Hualu entering a ring now where companies will be forced to combine video with e-commerce. What Hualu has done, which is really setting a lead, is the way forward. For example, they signed agreements with Amazon and Dangdang which allow consumers to buy TV and movie products produced by Hualu on their websites. And they’ve also formed partnerships with social networking sites.”

In fact, to make these companies remain viable, online shopping is not the only way out. Video-streaming websites may consider charging a reasonable price for people to watch films online. If so, the new solution will have a dual effect. It’ll ensure the web media company makes a profit and it’ll better protect intellectual property rights.

Seven Chinese video-streaming websites have taken the lead by establishing an alliance that could share authorized films and show them to netizens simultaneously while charging the same fee. Jia Yuemin, vice president of letv.com, which initiated the alliance, was quoted by Xinhua news agency as saying that Internet-based cinema would ensure netizens see authorized copies of films and provide high-definition viewing at a reasonable price. The members of the alliance include letv.com, qq.com, joy.cn, xunlei.com, baofeng.com, pptv.com and pps.tv.

In January this year to test the market, tudou.com, a local video website, put the blockbuster “Let the Bullets Fly” online. They charged 5 yuan to see the film for 48 hours. This test received positive responses from netizens.

SOURCE: english.cri.cn (27/5/11)

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