Monday, September 10, 2012

China's online video industry is catching everyone's attention

Before the fireworks would ring in 2012, an even bigger show in China's online video industry was catching everyone's attention. What was initially a "cat fight" between the two major video websites Tudou and Youku has ballooned into a battle royal involving over 10 parties from China, Japan to Taiwan.
It all started on December 15th when Taiwan CtiTV accused Youku of streaming its TV shows "Kangxi Lai Le." That same day, Tudou who has the rights to "Kangxi Lai Le" held a joint press conference with CtiTV, demanding 150 million RMB in compensation from Youku.
"Kangxi Lai Le" is one of Taiwan CtiTV's most popular shows in mainland China and Hong Kong. Because people from mainland China cannot watch Taiwan TV shows on broadcast TV, their only option is through video streaming websites. While the viewer count for "Kangxi Lai Le" in 2010 alone was over 1.5 billion, CtiTV was unable to collect any royalties from the show that had been illegally circulating on the Internet for 7 years. That was until Tudou finally secured the rights for the show in November 2011.
It is understandable why the "Kangxi Lai Le" case started to attract so much attention. If Tudou wins, it will represent a huge lost for Youku, both in terms of money and reputation. Youku obviously didn't back down. On December 16th, following the Tudou and CtiTV's conference, Youku claimed that Tudou had over a hundred pirated works on its platform and that it was preparing a lawsuit.
This fight between Tudou and Youku became known as "2U Fight" by Chinese internet users. While it initially looked like a cat fight between two well established competitors, the scene would change dramatically in the coming days.
On December 19th, TV Tokyo accused Youku of illegally distributing some of its hottest animation titles including "Naruto", "Gintama", and "Bleach". That same day, Youku announced it was suing Tudou with evidence that it had collected.
Two days later, LeTV demanded Youku pay 1 million RMB in compensation for copyright infringement of the movie "Treasure Hunt". This came in the backdrop of a decision by the Court of Final Appeal, which ruled that Youku owed 190,000 RMB in compensation to H. Brothers Media for putting the movie "If You are the One II" on its website. Meanwhile, news surfaced that Youku was already being sued by Jiangsu Broadcasting Corporation(JSBC), regarding its TV show "Fei Cheng Wu Rao".
"Fei Cheng Wu Rao" is a very popular dating game show in China. In the beginning of 2010, JSBC partnered with Youku to air the show online. The partnership soon ended because Youku violated the terms of the agreement by editing the original advertising in the show. Despite the agreement's termination, Youku kept the show on its website and continued selling advertisement, resulting in a lawsuit by JSBC against Youku.
On December 23, Xunlei announced that they finished collecting vidence for a lawsuit accusing Youku of illegally streaming 19 movies.
With powerful parties, popular shows, movies, and animations involved, Youku seems to be pushed to the edge with millions of Internet users watching from the sidelines. Some insider worry about how this war could affect not only Youku and Tudou, but the entire online video industry. Youku and Tudou are just some of the many Chinese online portals that are now publicly traded on Wall Street. The copyright fight could very well have an adverse on their stock prices as well as other companies seeking to launch an IPO.
The "2U Fight" is reminiscent of the "China Internet Video Anti-Piracy Alliance" formed by several Chinese portals such as Sohu, Voole and The alliance launched a lawsuit against major video websites right before their IPOs in 2009, including Youku, Tudou and Xunlei. The timing of the lawsuit and IPOs forced the industry to somewhat address video copyright issues, causing the price of movies and TV shows to rise as portals scrambled to acquire their rights.
Where will the "2U Fight" lead is still uncertain, but with an even broader set of stakeholders involved, well known programs and increasing public awareness, I believe it will result in a more formal and legal marketplace.

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