Cultural revolution for Chinese online video market as SVOD rises | VOD | News | Rapid TV News
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The notion of paying for online video content may be to date a novelty in a country where piracy has been rife but subscription video-on-demand (SVOD) is becoming a force in China, says analyst Futuresource.

Netflix china 12 MarchIn a round-up of a market with vast potential, Futuresource says that after a period where the legal market has long been dominated by ad-funded on-demand services, the Chinese home video market is in the midst of a cultural revolution, with the growing acceptance and uptake of legal paid-for SVOD services.

The key drivers for this, says Futuresource, are a combination of demand from younger viewers and the fact that SVOD is another battleground in the fight for consumers between heavyweight Chinese companies Baidu, Alibaba and Tencent. Alibaba acquired the Youku Tudou SVOD service in 2015 while Chinese search engine giant Baidu owns the iQiyi SVOD service.  Also active is online gaming and social media platform Tencent and technology company Le TV. Each is estimated to have in excess of 10 million paying subscribers and is continuing to grow fast.

Futuresource also notes that conspicuous by their absence are the leading global SVOD players Netflix and Amazon Prime Video, both of whose expansion into China, the analyst says, is hamstrung by local legislation dictating that 70% of the content carried must be local content and that overseas organisations operating online in China must use local data storage facilities and domestic equipment. In addition to ownership regulations stipulating that foreign companies establishing an operation in China must be part of a joint venture with a Chinese company, such companies can only hold a maximum 51% stake in the venture.

This has all led, says Futuresource, to the major domestic SVOD services marching ahead establishing in-house content production divisions and augmenting their local content offering through licensing deals with the major Hollywood studios; Tencent with Paramount and Sony, Youku with Universal and iQiyi with Fox. US and international feature film content is another key driver for consumer SVOD adoption with 56% of Chinese SVOD users citing this as the main reason for subscribing to a service (Futuresource research Q3 2016).

Looking ahead, Futuresource sees the Chinese SVOD market as having huge potential for growth, given more fuel by its finding that two-thirds of SVOD users are in the 16 to 35 age group, a demographic increasingly interested in high quality, premium content and crucially not deterred by the concept of paying for access.

However, the analyst warned that there could be some gating factors. Piracy, both in terms of illegal streaming and downloads, persists and even though the VOD sector has been traditionally relatively free of the strict censorship controls that have impacted the TV and feature film segments, there are indications that the Chinese government is beginning to tighten regulations in line with the rest of the media industry.