On March 28, the popular domestic internet television service PPStream announced that a second round of ＄10 million worth of financing had been completed with Venus Venture Capital and Lianchuang Ceyuan. The news comes eight days after the State Administration of Radio, Film, and Television called for various broadcasting agencies to punish severely the "China International Chinese Television Station", making it the eighth internet television station that has been punished thus far.
Since the Agency's investigation of the station (www.ccnettv.com) at the end of last year, the National Copyright Administration of the People's Republic of China, the General Administration of Press and Publication of the People's Republic of China, along with other controlling agencies, have indicated that this year, P2P downloading sites that offer pornographic or pirated content will be fiercely dealt with. Meanwhile, the domestic online video industry is experiencing its first downturn after the recent surge.
By the time internet video started to feel pressure, such websites already numbered between two and three hundred in China-- so numerous were they that 2006 was called "the year of online video". Microsoft founder Bill Gates has gone so far as to say that online video would challenge television's status within five years, but that it is not a gold mine for everyone.
Nascent online video companies currently face basic problems-- numerous technology standards, a lack of content, limited bandwidth, and long-term survival limited by initial investment. As a result, content management and the pressure of making profit have pushed many sites to the brink of bankruptcy.
Thus, although online video operators dream of large windfalls, they are now wary of going from pioneers to martyrs.
Crisis-ridden
In a strict sense, internet television refers to websites that broadcast according to a schedule. But now the lines are blurring, and sites offering on-demand viewable content, streaming programs, and fully downloadable content are now regarded as internet television websites. Examples include QQLive, Sina, Sohu Video, as well as Youku and Tudou Networks.
Internet television stations now need operating permits. When the State Administration of Radio, Film, and Television published its "List of organizations permitted to broadcast audio-visual programs online", only 66 websites had received permission, essentially all of which were television stations and cable operators. One industry insider revealed that presently, almost all businesses publicly providing video broadcasts are cooperating with the Agency in a grey legal area.
Sites similar to the "China International Chinese Television Station" that organize their own journalists' reports and illegally create content have been banned. Meanwhile, sites that directly broadcast traditional television content online and are actively infringing copyrights, and porn sites with downloadable short films, are becoming ubiquitous.
Internet television has extremely high technological requirements; the slightest error will disrupt the smooth viewing of content and affect the consumer's experience. Wang Xiaochuan, vice-president of Sohu tells us that Sohu's P2P technology has drastically helped the development of internet television. Even so, this is a mortal weakness for some online video websites.
Profit models are also suffering. Besides advertisements, there are almost no other revenue channels, and small websites that do not have the advertising capacity of of Sina, Sohu, and Tengxun are often pulled under. While some larger websites are refusing ads, smaller websites are left on the sidelines.
These large domestic companies pushing the limits in internet television are causing difficulty for small companies that purely copy the successful US site YouTube. "This will cause a shakeup in the industry. This year will be a lively one, with a lot of businesses going bankrupt," says Guo Qiang, vice-president of Beijing Huojulianhe Network Services Limited.
But the ＄1.65 billion purchase of YouTube by Google has already become a catalyst for internet video sites.
In 2006, venture capitalists had already burned ＄100 million on the online video industry. Last August, Tudou had received a second round of ＄8.5 million in investment, Youku also received ＄12 million in a second round of venture capital. At the beginning of this year, Youshi received a second round of ＄23.5 million in financing, after already receiving ＄18 million.
Through cooperative purchases made with the State Administration of Radio, Film, and Television, Sina, Sohu, and Tengxun have settled copyrights. Ao Ming, chief inspector of Sohu Sports Center, tells us that when the World Cup broadcasts started, Sohu had already gained rights to NBA, CSL, CBA, CUBA, and other high-profile competitions, "taking the NBA live broadcasts as an example, when the Miami Heat played Houston Rockets, the online audience reached 1.24 million."
Tengxun is also cooperating with Hunan satellite television on the "happy headquarters" project. This helps them avoid content risk, since most small-scale online video sites usually rely on themselves for checking content. "Youku has people around the clock watching uploaded content," says Youku's president, Gu Yongqiang.
Actually, Youku's use of guest uploads in order to gather content has already been influential-- no one expected that during the Shenyang blizzard, when almost all media was stumped and traffic paralyzed, a local blog's video piece became highly sought content for television.
"At that time our website hosted over 100 videos related to the Shenyang blizzard," says Gu. Television stations immediately contacted Youku, hoping that they could get in touch with the filmmakers and receive their permission to broadcast their pieces. This became a classic case of amateur filmmakers becoming involved with television stations.
Beyond the realm of personal entertainment, it's becoming popular for business websites to use video for introductions and promotions. More and more business sites are turning themselves into small television stations, with their products and services being classified into channels, says Guo.
"Haier and Sanxing cell phones are already attempting this," says Guo. "But actually, what draws from online video more are the wildly popular online forums. In the future, the internet will be brimming with content diversification, in the form of many types of video programs: short films, documentaries, DV video, edited video, advertisements, etc. And programs made from DV, DC, MP4, and various other formats will all become more and more popular... to the point that every person's blog will have video, recording their own programs."
In waiting to see what policies to use, the government is already starting to control both high-volume and under-the-radar websites, combing through online video. Aside from those illegal news broadcasters that must be stopped immediately, regarding content for entertainment and personal uses, as long as a few large-scale sites and companies with technology like Huoju's storage space and broadband are controlled, they can essentially control all of the almost all video sites in China.
