Chinese film struggles with online video

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Ancillary Feature

New media platforms were a major talking point during the Shanghai International Film Festival 上海國際電影節 – with two new initiatives launched this week – but achieving profitability remains elusive for all of them.

Another speaker said that there is no stable business model for online video in China.

Most online video services rely on advertising sales as subscriptions are rare and video-on-demand still emerging. Another speaker said that the price point of RMB5 ($0.78) for VoD was drawn up in reference to the street price of the illegal alternative, pirate DVDs.

Gong Yu (龚宇), CEO of iQiyi, likened the online video sector to China's PC industry in the 1990s. "It can start small and grow up," he said.

YU Dong 于冬, founder and CEO of theatrical distributor, producer and film investor Bona Film Group Ltd 博納影業集團有限公司, said that for online to grow it is necessary that the traditional cinema market be strong and that there be sufficient good quality Chinese content. Unless that happens "there is a risk that Chinese audiences will go to the cinema to watch Hollywood films while turning to the DVD and ancillary markets for local and low budget content," he said.

Curt Marvis, former president of digital media at US mini-major Lionsgate, described how the US online market is innovative and growing. He said that increasingly films are being given day-and-date releases across multiple media including online and theatrical. And he said that increasingly too companies are providing original content to the online sector.

Marvis described a tipping point in the US as when DVD-to-home service Netflix launched its online service. Now companies, including YouTube, are paying to acquire original content and then promoting shows with marketing budgets akin to traditional TV networks.

"YouTube and other online companies this year for the first time put on 'upfronts' [product showcases intended to win major consumer advertisers to their networks and shows]," just like conventional TV networks, Marvis said.

China may not yet be that far advanced but Chinese video companies and the major content owners are clearly looking at how to create and use original content to attract and hold viewers and to make some of them pay.

Bona's Yu spoke of creating TV series from characters and subplots from successful movies.

This week Huayi Brothers Media Corporation 華誼兄弟傳媒股份有限公司 unveiled a venture with BesTV New Media, a NASDAQ-listed new media spin off from Shanghai SME-New Media Technology Co Ltd 上海文廣新媒體有限公司, to create the Blockbuster channel. Huayi said that its two highest profile films later this year, Taichi Zero 太極１　從零開始 and the Jackie Chan vehicle CZ12 十二生肖, will be presented on the new service. So too will some 35 of Huayi's catalogue titles.

In a separate move, online video leader Xunlei Networking Technologies Ltd 深圳市迅雷网络技术有限公司 announced a "cross-media movie platform" that it will create in tandem with NADSAQ-listed outdoor advertising group Airmedia, private sector investor One Film Fund and KH Media. Total investment is expected to be RMB500 million ($79 million).

Xunlei Networking vice president Liu Feng, said that the platform aims to increase opportunities for Chinese films and to increase revenues for film by expanding the ancillary market. He said that of the 791 films made in China last year only 154 got theatrical released (other sources including SARFT provide slightly different data).

Bona's Yu said that cinema exhibitors still hold the balance of power in the Chinese film industry and will continue to do so until there are some 30,000 screens [up from today's 9,000]. At that point producers and distributors will be able to obtain better rental terms. And China may by then have stronger online video and pay-TV markets too.

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