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After years of spending on infrastructure, purchasing content, acquiring users and branding, those well-known Chinese online video services, Youkus in short, started producing original content, the same with what their objects of imitation in the West. Third-party content licensing prices, fueled by Chinese-style competitions,?skyrocketed around 2009 and finally fell to a comparatively reasonable level in 2012. At the same time, more than a few services have to share the not-big-at-all online video advertising market in China, and haven?t successfully lured users to subscribe to premium content. All said, there?s no hope to see them profitable in the near future.
That they followed well-known western video services, Youtube, Hulu and so on, is one of the reasons they received more media attention (it?s also true about almost all Chinese internet services). When they were talking about how hard to profit from this business or trying to justify how unlikely Chinese users would to pay for such a service, families in southern China subscribed to a China Telecom program for?watching online videos on their TV sets,?Voole, one of the biggest authorized video content providers, insisted on charging consumers, and LeTV, an online video provider, has been delivering profits (though it?s controversial about its accounting practice in amortization of licensing costs that will weigh on its future profits).
LeTV,?an interesting case in China fashion
LeTV?(SZ:300104), founded in 2004, was one of the first internet video services in China and the first one to go public.?Different from Youku and Tudou who started with user-generated content ? the Youtube model, LeTV began with licensed content. After realizing that UGC content could hardly be monetized, those UGC sites began purchasing copyrighted professional content in late 2008 ? it must have something to do with Hulu?s rising that year. But before that, LeTV had pocketed a big amount of exclusive content thus it became a content distributor, selling to its peers like Youku.
When everyone else realized the importance of exclusive content and turned to content providers directly, LeTV launched a set-up box in Feburary 2012. Unlike Xiaomi Box, LeTV?s is with no regulatory risk, thanks to the fact that it has a video content inventory. In China, only seven content providers ? most are state-owned ? are granted licenses for streaming videos to TV, third parties who manage to reach partnership with them can only offer content of license holders?, other than videos from Youkus. Doing differently from Xiaomi Box who offers unallowed content, LeTV?legitimated its own content by?handing it over to CNTV, an authorized one it partners with.
The first version of its set-up box, priced at 1999 yuan, is as expensive as a mid-range smart phone. And it reportedly didn?t perform well. After all kinds of set-up boxes emerged in the gray market and were prices at no more than several hundred yuan, LeTV also launched?a redesigned product, named C1, for zero yuan. However, consumers have to pay 399 yuan, a fee for watching premium content offered through the device for a year. That means LeTV will continue charging users annual fees.?An application for smart TV,?launched together with C1, also charges an annual fee, 490 yuan.
399 or 490 is close to what Chinese users are paying for cable TV subscription, 312 yuan, a price based on which?similar services,?such as China Telecom?s internet TV subscription, set prices.
LeTV has another two businesses as potential revenue resources:?Le Vision Pictures, LeTV?s brother company, was founded in 2008 for self-made videos, planning to produce thirty films annually;?Letv Store,?a TV app store, is set up for collecting apps for TV entertainment. As LeTV put it, four monetization sources, hardware sales, paid content, paid apps or in-app sales, and advertising, form a full-fledged revenue structure.
Sounds making perfect sense, isn?t it? It?s also possible that LeTV will turn out to be another Chinese company who knows how to play Chinese-style games but fail the market. But, on the other hand, I really doubt how not Youkus to become online TV stations that can only make moderate advertising revenues from self-made programs and licensed content, exactly in the same way with the existing Chinese TV stations. How about the mobile? Would it make a difference in selling ads?
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- China State Administration: Chinese online video audience reached 450mn
- China Online Video Roundup: Tencent, Advertising Money, iQiyi
- Youku, Tudou and Sohu Lead China?s Online Video Advertising Market
Source: http://technode.com/2013/01/03/how-about-doing-online-video-business-in-china-fashion/
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