My favorite soap opera: the Chinese online video market

Written on July 1, 2008 – 1:26 pm
Ernst-Jan Pfauth, editor in chief

On days like today it seems no industry is more exciting than the Chinese online video market. It’s like a soap opera with all the right ingredients: a government that isn’t afraid to pull the censorship card every once in a while, tough competition, as much rumors as videos, and millions, millions of funding. So here’s your latest episode with, I must say, quite a cliff hanger.

The millions of funding

Firstly, there’s Youku. Nobody’s exactly sure, but they seem to be the no. 2 video site (100 million daily video views). They’ve already gathered $40 million of funding in three rounds and announced yesterday that this number has doubled. The video site received $30 million from existing investors Brookside Capital Partners, Sutter Hill Ventures, Farallon Capital and Chengwei Ventures and added another $10 million with a loan by Western Technology Investment (former loans: Facebook and Google).

But that’s not all, as one of the other video players in world’s largest internet market also managed to get a few millions here and there. The Pacific Epoch reports that the smaller video site Ku6.com has received $30 million in series C funding. An employee secretly told them, as Ku6 isn’t very transparent when it comes to funding. They allegedly closed series B at the end of last year and received $10 million of series A funding in May 2007.

The destination of this money is almost certain, as Tudou (no.1) founder Marc van der Chijs told me that almost all the investments flow directly to bandwidth. He said that he could turn Tudou into a profitable business by limiting the bandwidth usage, yet then his competition would probably catch-up.

The censorship

In that very same conversation, Van der Chijs also mentioned that almost every censorship rumor isn’t true and just matches the way we, people from the west, like to see China. But here’s one thing that’s undeniable: 56.com (no. 3) has been off line for almost a month now. VentureBeat’s Eric Eldon wrote an excellent piece about this matter, and refers to several Chinese sources who claim 56.com has been taken off line by the government, particularly because they didn’t like 56.com footage of the earthquake in May. “We may never know the real reason why 56.com has been shut down”, Eldon wrote, “But if the cause is censorship, this is a tragedy for anyone who believes in the democratic system.”

There’s your cliff hanger people. Stay tuned to your blog to hear the latest on this soap opera where two forces clash on almost a daily basis: the money versus the government.

I hope you like that post!

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56.com, censorship, china, funding, marc van der chijs, online video, tudou, youku

About the author: Ernst-Jan is a blogger and journalist, who previously worked in New York to cover news at the United Nations. Next to writing, he's also a singer in the band Christina Five.

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6 comments/trackbacks to “My favorite soap opera: the Chinese online video market”

Aug 25, 2008: Will Europe follow Chinese trend of subsituting TV for YouTube?
[...] China, this already is the case. The country is home of world’s most exciting online video market. The government isn’t afraid to pull the censorship card every once in a while, there’s [...]

By Rutger van Waveren on Jul 1, 2008

This week’s On The Media (an NPR radio show) has an interesting piece on the internet in China and the government’s role in it: http://onthemedia.org/transcripts/2008/06/27/02

There is an audio fragment which is worth listening. Skip to the 2 minute mark to hear Rebecca MacKinnon (Assistant Professor at the University of Hong Kong’s Journalism and Media Studies Centre).

Reply
By Pieter-Paul Walraven on Jul 2, 2008

All the bigger video-sharing sites in China are constantly corresponding with the government which is essential in this market. There are already some smaller players (like Ku6) that have secured licenses from the State Administration of Radio, Film, and Television (SARFT).

Maybe 2008 is the year where also Youku or Tudou will finally get a license if they start ‘behaving’. I think the big players like Youku and Tudou know that for stability and luring in investors they have to change soon. Also because of the high bandwidth use and costs they have to start making money fast.

I interviewed Viktor Koo while in Beijing and he told me that 2008 is the year of the big clean-up. This is going to be a challenge for them since Both Youku and Tudou have grown so big partly because of their sensitive content (sex sells, especially in a censured society!). The big players have to act simultaniously or at least communicate with each other about this clean-up, otherwise they might lose a lot of users. If they dont they might be shut down for a while and get a bad reputation which scares potential investors or, worse, they could be shut down forever.

Anyway, the Chinese video-sharing market (and Internet market in general) is something to keep an eye on. Also because of the innovative ways they will soon start to advertise and monetize. Something we can learn from in the West! I recommend everybody that is interested in China Web 2.0 to read Kaiser Kuo’s blog: http://digitalwatch.ogilvy.com.cn/en/

Reply
By ArtHack on Jul 24, 2008

We can not think you also concerned about the situation of China’s online video, terrible……

Reply
By 禾草唐楷 on Aug 26, 2008

In China, each video sites are in difficult period, many of them bound by the Government, therefore, I am not optimistic about the development of video site

Reply
By Ernst-Jan Pfauth on August 26th, 2008:
But don’t you think that as long as their incredibly successful, new initiatives will keep popping up?

Reply

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