Oh China, one of the few places where you can watch the sunrise... on a giant TV in the city square because the smog is so thick it prevents you from actually seeing it. Best use of live streaming video ever? Then again, they are also one of the largest online populations in the world with over 600 million internet users. Granted, that's like just 50% or so of the country, give or take so there's plenty of room for expansion. The online video audience? Just a paltry 450 million...
I heard all your gears come screeching to a halt when I said 450 million Chinese watch video online. I know my gears hiccuped as I started to put some numbers together in my head, like there are just 189 million Americans watching video online, Europe has around 520 million online users, etc.
The 450 million Chinese watching video online is about 80% of China's online population which is sitting around 610 million, give or take 10 million. That online video population is expected to top 700 million by 2016 according to an infographic put together by Go-Globe.com.
The infographic is very much like China, in that it's massive! Makes me think that Chinese subtitles are going to be more and more important in the global online video industry sooner rather than later.
Video Industry Revenue in China
In terms of revenue for the video industry over there it's not as large per digital video viewing capita. With 450 million it's just roughly 12.2 billion yuan or in U.S. terms, $2.016 Billion. So that's about $4.50 per person per year.
Then again, that's set to double by 2016 to 25.9 billion Yuan, ($4.13B).
Advertising is leading the revenue growth in the country bringing in the lion's share with around 75% of all revenue. The other 25% is a mix of other things.
Piracy Issues Being Addressed
Part of that might be the fact that piracy runs rampant in China yet. Things are changing though as Hollywood has cut deals with major sites in the country. The content is free to the viewers and the sites make revenue off of advertising. Presumably portions of that advertising is then funneled back to Hollywood in order to obtain the content. They've also teamed with the illustrious, or is that infamous, MPAA to begin copyright suits against other sites that are allegedly infringing on the content copyrights.
Video on Demand
But the Chinese are going to have to accept change as VOD is starting to become the preferred method for online movie distribution now.
The same may happen for TV as well since so many Chinese prefer online video to TV. And why not? They can get TV from a variety of other countries online giving them a far larger set of content to choose from. However, it might find some obstacles in a country where the average person is still more interested in downloading something for free than even going to the shop to pay $1.60 for a disc.
The times are definitely changing though as pay sites are starting to become more prevalent and people are seemingly more willing to pay for content these days. Perhaps they're starting to see the value that they get in return for the convenience of online video.
There seems to be a big marketing push today about China and online video and I'm not exactly sure where it's coming from. Multiple sites have run the exact same article which includes a couple interviews talking about it all. I'd be curious to see where that came from as it's just listed as Beijing AP. At least three sites printed it word-for-word including The Vancouver Sun, in Minneapolis and, USAToday. Perhaps business endeavors in the country want the U.S. video content companies to know that the country is open for business and that people are coming round to the thought of paying for video content or sitting through ads to generate revenue?
Doing business in the country in terms of online video is certainly interesting. For example Huawei offers a 6.1 inch smartphone and has teamed up with YOU on Demand to create an app that streams two free Hollywood movies a week for a subscription fee. So while in the U.S. it's all about choice and availability, in China it seems more about putting together a package for the users that includes a device to view on and an app for them to get content, on that particular device, for a fee.
Pricing is also another area where the online video business is adapting in China. A new streaming movie rental is under a buck there where it's right around $5 here.
Huge Opportunities for Growth
The apparent message to take away from all the sudden coverage is that first and foremost, you will almost never see the sunrise with your own eyes because of smog. Secondly, China might not be such a bad place to do business, provided you do it with the appropriate companies and conform to their ideas of how video should be available online.
For example, the companies cited in the infographic, are also the companies cited in the articles I mentioned. At least the top two at the bottom of the infographic. Perhaps it's a stock manipulation thing? Youku Todou INc is on NASDAQ and the list of institutional investors includes Price T Rowe, Morgan Stanley, Janus, and some other large investment firms. The stock was in quite a decline bottoming out around $14.50 a share when it was up near $67.25 a share back in April.
Sohu is also on NASDAQ, took a big hit in November with stocks down to $61/share but today is up to $75/share.
Curtain, pulled back.
Now I'm not suggesting you steer clear of China in regards to your video content publishing. Far from it in fact. Run to embrace them with open arms. Because if you don't, the content will probably show up on one of those sites that isn't playing inside the rules of the current system and your content will probably be pirated. That will lose you even the moderate revenue stream you could garner from working with a company that is showing ads in order to stream your content to users in the country. Some revenue is better than none, right?
Plus, if your content is a hit now, as the audience continues to grow and revenue increases you might be able to eventually move your new content into a pay-per-view, or subscription service there and increase the ROI on the initial investment.
Video advertising networks should certainly be all over China already. I wonder if we'll see a series of mergers or acquisitions in the coming month or two because of how much of the online video revenue in China stems from it. If I were a major U.S. video advertising network I would certainly be looking to purchase a Chinese one or at least create a strategic partnership or exclusive deal where my company provides or has rights to the ad inventory, etc.
Another industry that could see some serious revenue generation here in the States is subtitling in Chinese dialects or even voice acting and translation services.
After all, if you can capture 10% of the China online video market, you've got yourself 45 million viewers. That's a whole lot of eyeballs on your content. There's no better way to transmit a message than in video, in their own language.