Increased Digital Distribution Boosts Chinese Film, TV Royalties (Report)

Youku Logo - H 2012

Youku Logo - H 2012

Earnings from copyrighted content are expected to reach a record $516 million this year, according to research from Entgroup.

The growth of a legitimate online TV and movie market in China has boosted royalties for local film and TV production companies, according to new research from Entgroup.

Royalties from copyrighted movies and TV programs are expected to reach a record $516 million this year.

"New media distribution and sales is becoming a new source of revenue for China’s films and TV production companies," Entgroup analyst Verne Zhu said in a report.

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Pre-sales through new media platforms has allowed companies to recoup their capital in advance and put that money back into production, Zhu adds.

Hollywood executives who have struggled to combat piracy but are eager to exploit opportunities offered by the burgeoning online video market should be happy to hear about this development.

China is the world's largest Internet market with 591 million users, and in the last year, the number of people who surf the web from smartphones and tablets rose by 20 percent.

"The rapid development of new media captures the attention of films and TV production companies," said Zhu. "With the mergers and acquisitions among video sites, as well as enhanced efforts in original self-produced programs, the market is moving towards a more rational stage."

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Entgroup believes the rapid increase in new media sales revenue is closely related to the explosive development of video sites in the recent years. The market leader in online video, Youku Tudou spent $122.5 million acquiring content rights in 2012, which is 120 percent year-on-year growth.

The report cites figures from companies such as Beijing Hualu Baina Entertainment, which has seen the portion of total revenues from new media earnings jump from 0.5 percent in 2007 to six percent last year.

Huayi Brothers, Zhejiang Huace Media and Shanghai New Cultures have also benefited from this trend.

In addition to selling copyrights, more companies are carving out new media marketing channels for their own products by investing in video sites, allowing them to get more revenue from online advertising.

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The market has seen strong consolidation in recent months.

The country's biggest search engine Baidu is taking aim at Youku with its increased focus on online video. In November it acquired a majority stake in loss-leading online video unit, iQiyi, and in April it bought the popular Shanghai-based video streaming service provider PPS Net TV for $370 million.

In January, Tencent announced it would be partnering with Warner Bros., Universal Studios, Miramax Films and Lionsgate for a new online video venture called Hollywood VIP to distribute content online via Tencent's various online video channels and social-media platforms.