Boom time for China's paid-content market

Low rates among reasons more people are willing to pay for online entertainment

Hotel manager Mengyao Yinan devours most of his entertainment on the move these days. Like many of his peers, he pays for all this content being beamed to his phone willingly, rather than seek out their pirated versions.

This makes him part of the generation whose consumption habits are reversing the Middle Kingdom's reputation as a haven for piracy and intellectual property infringement.

"Convenience and immediate availability are very important, so I don't mind paying so I can watch a new movie in high definition, or listen to a big library of music during my commute to work," said Mr Mengyao, 25.

This mindset shift towards paying is creating what was once thought improbable - a lucrative online marketplace for entertainment content that serves the Chinese market.

Get The Straits Times
newsletters in your inbox

The China Daily reported this week that the paying viewership of the three major video-streaming companies in the country - iQiyi, Youku Tudou and Tencent Video - reached 70 million in the first quarter this year, twice that of the same period last year. While that accounts for only a fraction of the 520 million online video viewers in China today, investment bank JP Morgan projects that by 2020, the number will swell to 234 million.

Last year also saw China top the charts for the first time in game software revenues, generating US$24.6 billion (S$34 billion) compared to the US' US$24.1 billion, a gap that is expected to widen.

These developments have seen well-regarded US venture capitalist Mary Meeker declare last week that China is now in a "golden age" of online entertainment, with the market primed for explosive growth in the coming years.

  • 70m

    Paying viewership of three major video-streaming companies in first quarter of 2017, twice that of the same period in 2016.

    234m

    Estimated number of people who will pay for online video content in 2020.

    US$24.6b

    China's game software revenues last year, surpassing US market for the first time.

But while Ms Meeker attributed the spectacular growth to increased Internet use and entertainment providers' success in converting ad-supported users to paid ones, other experts said two other factors helped lay the groundwork.

First was Beijing's introduction of tough anti-piracy regulations in 2015 and its subsequent crackdown on illegal video and music sites.

In one campaign last year, the country's copyright watchdog shut down 290 such sites and issued fines of 4.67 million yuan (S$950,000), drawing rare kudos from industry groups such as the US-based International Intellectual Property Alliance (IIPA).

This government crackdown on freely available but illegal options opened the door for the expansion of legal companies to attract more customers, said Sony Music Entertainment CEO for China and Taiwan Samuel Chou.

Another factor is that keen competition and the race to sign up paying subscribers has kept prices for legal content in China among the lowest in the world. For instance, Mr Mengyao pays just 110 yuan a year to video streaming service Kankan for advertisement-free, high-definition content, and 80 yuan a year to music provider NetEase Cloud Music. By comparison, a standard Netflix Singapore subscription costs $167 a year.

While low prices have made it easy for many Chinese to switch to licensed content, this and protectionist measures that have prevented foreign players from competing in the Chinese market could still hamper growth, said the IIPA.

"China's legacy of piracy continues to distort the market, including by severely depressing licensing revenues, and its continued pursuit of policies that deny fair and equitable market access to US content producers and distributors threatens to undermine the progress that has been achieved," it said in a report.

But for many Chinese, such as Ms Miao Lili, 39, the prolific growth in quality content has been a boon, as this has also spilled over to the education and self-improvement sectors. The farmstay operator recently bought a year-long, online-only English course for her five-year-old son via WeChat.

"The course is very professionally done, with 240 lessons that include songs and games," she said. "Such courses exist only because enough people are willing to pay for them."

A version of this article appeared in the print edition of The Straits Times on June 08, 2017, with the headline 'Boom time for China's paid-content market'. Print Edition | Subscribe