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Licensed media entertainment content makes its way into China

In the past year, two of China’s big players in the digital media market, Youku and Baidu, have moved into offering licensed and/or pay-per-view content to its users. With few physical distribution options available in the Chinese market, offering online entertainment content, with the consent from U.S. media producers and the Chinese government, opens a new and exciting distribution channel of U.S. media content in China.

Youku, which offers its users to upload videos without any time limits, has since their earlier days seen pirated TV shows and movies being uploaded to their servers. In order to better their reputation amongst advertisers, both in China and worldwide, Youku announced their new and improved fingerprinting technology, a technology that scans through all uploaded material in their video library, and automatically delete content that are subject to copyright infringements. With implementing this technology in January 2010, Youku saw a decrease in abroad copyright infringement lawsuits and a reputation that made its way up the ladder.

Last month, Youku made a second major strike against pirated material on its website. Teaming up with U.S. media giant Warner Bros., Youku are now offering top quality U.S. movies and TV shows for a price which is next to nothing. As a result of the recent partnership, users of Youku.com can today stream content, such as the recent worldwide blockbuster “Inception”, in high resolution for only RMB 5 and older library selections
for RMB 3.

Early in 2010, the Chinese search engine Baidu joined forces with U.S. private-equity firm Providence Equity Partners LLC to create Qiyi.com, a advertisement-supported website where users can view licensed media content, very similar to the U.S. service Hulu.com. Qiyi’s CEO, Gong Yu, states that “the site will spend over RMB 200 million toward content procurement”, which means that Qiyi’s users will most likely have plenty of high quality content to choose from.

The online video market saw a 95 per cent increase in its total revenues from 2008 to 2009, so it is safe to say that offering licensed online media content to a dynamic market segment, such as China’s Y and Z generations, is likely to be a recipe for success.

But how to market the fast moving generations of Y’s and Z’s effectively can be a fairly difficult challenge. As there are several websites that offer the same amount of media content as Youku and Qiyi for free and without advertisements, even though it is pirated, the majority of users tend to move towards the cheaper option. The current and future licensed media content sites would therefore need to find a way to motivate their users to use their media services over the less legal ones. Could offering a reasonable priced subscription service on their media content be an attractive solution?