China’s video rivals to start joint buying

China’s video rivals to start joint buying

By Patrick Frater

originally published in Film Business Asia Thu, 26 April 2012

Ancillary News

Three of China’s online video rivals are to form an alliance that is intended to cut the costs of acquiring content for their platforms.

According to an email from the three companies, Tencent Holdings Ltd 騰訊控股有限公司, Sohu.com Inc 搜狐公司 and Baidu Inc 百度’s iQiyi.com will collaborate in Video Content Co-operation, a vehicle for acquisitions of film and TV content. They say that this will help restore “rational pricing”. The three will also co-operate in terms of back catalogue and other operations.

Their move represents further consolidation of the fast-changing business sector and follows last month’s proposed corporate merger of China’s two largest online video enterprises Youku and Tudou.

“Sohu, Tencent and Baidu are all iconic Internet giants in China. We will integrate our capabilities in online video portals, search engines and social networks to better service online video consumers,” said DENG Ye 鄧曄, CEO of Sohu Video and VP of Sohu.com.

According to data from Enfodesk, Youku Inc 優酷 accounts for 22% of online market share, ahead of Tudou Inc 土豆網 with 14%. Third placed Sohu has 13%, while Tencent, which only launched its video services in April last year trails a long way behind.

Content acquisition and bandwidth represent the largest costs for the online video firms. According to some sources the video players will now pay $160,000 per episode for popular TV shows, while Bona Film Group Ltd 博納影業集團有限公司 last year revealed that it had earned RMB8 million ($1.25 million) from online rights sales of hit Overheard 2 竊聽風雲２.

The industry is considered to have huge potential with vast numbers of people using online to watch film and TV shows. But with revenue models unstable and costs climbing it has been hard for any company to consistently make profits.

The number of Chinese Internet users who watch videos online had reached 325 million by Dec 31, according to China Internet Network Information Centre.