Pay-to-watch gains popularity in China

Content-streaming websites go pay, pull in big revenues in quick time 

In China, pay-to-watch is becoming popular online. The days of free online entertainment may soon become history.

Chinese audiences are learning to pay for a variety of membership packages offered by iQiyi.com, Youku Tudou Inc, Tencent Holdings Ltd and LeEco Holdings Ltd to watch popular dramas and other kinds of content online.

"The two barriers to paid online viewing－rampant piracy and lack of payment systems－no longer exist. The fee-based online viewing business has entered a phase of rapid development," said Yang Xianghua, senior vice-president of iQiyi.

In June 2015, iQiyi had 5 million paying users. By December, their number doubled to 10 million, constituting 2 percent of total viewers.

It has grown since. By March-end, iQiyi was targeting 60 million, or 10 percent of its current viewers, for pay services, according to Yang.

"So, we've made a large investment in technology and content. For example, we purchased a great number of high-quality films and TV dramas," said Yang.

According to a report by iResearch Consulting Group, the number of paying viewers in 2015 soared 264 percent to 28.84 million, and is expected to reach 54.41 million this year.

Revenue from online viewing memberships jumped from 1.39 billion yuan ($214.6 million) in 2014 to 5.13 billion yuan in 2015, up 270 percent. The next couple of years will see continued rapid growth in revenues and could reach 18.79 billion yuan in 2018.

However, the penetration rate of paid users is still low at 5.7 percent, suggesting the potential for development is huge.

It's huge because the quality and popularity of TV dramas, including foreign shows, have improved, bringing about a sharp rise in paying viewers in China. For instance, the climax of Descendants of the Sun, a South Korean TV drama, is attracting Chinese eyeballs.

A man passes by Youku's billboard in Shanghai.[Provided to China Daily]

The 16-episode love drama between a United Nations peacekeeping troop captain and a volunteer doctor in a war-torn country is now airing on iQiyi at 9 pm every Wednesday and Thursday, the same time as South Korea's KBS.
IQiyi claims there have been more than 1.2 billion views of the series till March 25. Its VIP membership is ad-free and two episodes ahead of free users. It is priced at 19.8 yuan per month, 58 yuan per quarter and 198 yuan per year.

South Korea's Yonhap News Agency reported the number of iQiyi's paying users has risen by 50 percent to at least 15 million after the netcast began. This suggests the website's revenue may have received a boost of no less than 190million yuan.

This is not the first time a hot TV drama increases online revenues. Last year, the series Grave Robbers' Chronicles, based on a best-selling series of novels, triggered a paid viewing craze.

It was viewed 160 million times and attracted 2.6 million new VIP members within five minutes since it premiered on July 3. According to iQiyi, its server crashed, unable to cope with heavy online traffic.

Till last October, iQiyi had the largest 56.4 percent share of the market, followed by Youku Tudou and Tencent Video. iQiyi remains the market leader, according to a report by the China Netcasting Services Association and the China Internet Network Information Center.

The company will commit more than 50 percent of its investments this year to develop VIP memberships for online viewing. It expects the income from membership to surpass advertising revenue in future, Yang said.

iQiyi pulls in revenue also from netcasts of films, self-produced drama series, live concerts,music and documentaries.

Its digital library has more than 6,000 film titles, including domestic and overseas movies. In February, it formed a strategic cooperation agreement with international record company Universal Music. Its members could now watch top live concerts and MTV shows from the United States, Europe and other countries worldwide. They could also enjoy documentaries from BBC and Discovery Channel.

"The 10 million VIP members help us to understand the change in the pay-to-watch market. This also means China's online culture-and-entertainment consumer market is at a turning point, where games, music, education, online reading and many other fields could seek an opportunity for development," Yang said.

Youku Tudou, another major online video site, has about 4 million members. It will invest 10 billion yuan to build up high-quality paid content. It will offer more than 50 customized dramas for its VIP members.

The online video giant Youku Tudou was acquired by Alibaba Group Holding Ltd last November.

"The post-1990 generation has a rising awareness of copyright and a strong willingness, ability and habit to pay for what they watch. The group has gradually become the mainstream of culture and entertainment consumers," said Wei Ming, co-president of Youku Tudou Business Group and general manager of Alibaba digital entertainment business unit.

Netcast firms' VIP viewers will be given priority to watch overseas TV dramas, dozens of films produced by Alibaba Pictures, sports events such as National Football League and FIFA Club World Cup through cooperation with Alisports.

Wei said Youku Tudou will connect its VIP members with diversified businesses of Alibaba. By compiling and analyzing data on online users' viewing behavior, the company plans to launch tailor-made services and products to create more value.

Feng Jun, a senior analyst at EntGroup Inc, a leading research center of the entertainment industry, said: "The market for paid users of streaming Websites made a giant leap last year and will continue its rapid growth in the next two to three years.

"The online resources are limitless. We notice that some TV dramas that haven't been aired on TV channels, were first played on video websites, which is a feast for viewers and a new commercial model for producers."

There is no doubt that high-quality content increases VIP membership, she said.

However, the market is still nascent. Its scale is relatively small compared with overseas video-streaming Websites such as Netflix of the US, which boasts 74 million subscribers in 190 countries around the world.

"Thankfully, the habit of paying for what they watch is now forming," said Feng. "We expect online content to be wide-ranging to satisfy different audience groups. There will be personalized, elaborate value-added services as well." A boy checks out iQiyi video content at an international copyright fair in Beijing. DA WEI / FOR CHINA DAILY