A scramble for China's video riches

Given the robust potential that China’s online video sector holds, it should come as no surprise that the major digital companies have been attempting to throw their weight around to do what they can to secure future market share.

In the latest act of China’s ongoing online video theatre, another one of the country’s most prominent players has found there is little that can be done to shake up China’s video hierarchy.

In November, five separate companies , including CCTV, Xunlei and NetMovie.com, filed charges against leading portal Sohu, reportedly for copyright infringement.

Sohu, which leads 110 online video companies in the Chinese Online Video Anti-Piracy Alliance, had seen this before: two month’s earlier, online video site Youku launched two suits against Sohu - one for copyright infringement and one for defamation.

The latter suit was launched after the Anti-Piracy Alliance announced its intention to file infringement grievances against Youku, as well as Pepsi and Coca-Cola, for having advertised on unlicensed Youku videos. Youku’s suit was filed in a pre-emptive measure before the alliance acted on its claims.

For Sohu, the latest round of legal action appears to represent the deterioration of its anti-piracy alliance - which critics have said is a bullying tactic to target competitors. This is most clearly seen in NetMovie’s involvement in the new suit, as both it and Sohu as are members of the alliance.

“The interesting thing about these lawsuits is that Chinese companies are fighting each other,” says Dave Carini, analyst at Maverick China Research.

As Carini notes, most piracy complaints in the past have come from international companies whose content is being illegally used by in China. “Little has been resolved in these kinds of complaints, because the Chinese Government has a greater interest in promoting domestic companies,” he adds.

However, the current disputes also highlight a more unexpected trend - the online video industry’s slow but stead progress towards a more legal business model, and one that for the most part is emerging from within the industry rather than imposed externally by Government.

Carini argues that China is reaching a tipping point where domestic companies are beginning to value the long-term benefits of respecting intellectual property over the short-term rewards of pirated content.

“It will likely take a few years for this change to spread throughout the industry,” he says. “But as domestic IP disputes increase, the Government will be able to play a more balanced and active role in regulating the sector. Ultimately, this will help foreign content providers in China as well.”

Kenny Bloom, CEO at VisiTek Holdings, suggests that success in policing video content will come from a specific formula that includes cooperation from video sites, content providers and Government offices. To a certain extent, this is already happening, but will continue to be a lacklustre effort until definitive consequences are implemented.

“From a practical standpoint, the pirated videos are the most popular to watch on these sites, so what happens to your traffic if you’re forced to take all this off?” Bloom asks.

“The sites try to skirt copyright problems by hiding behind the user-generated veil. This would be okay, except as soon as you start selling advertising around these videos, you are media company and in any country that is illegal.”


This article was originally published in 3 December 2009 Winter issue of Digital Media.