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Now less visible in China

“Goodbye American Idol. Goodbye Simon [Cowell], I’ll miss your snarky comments,” Xiao Yu, an ardent fan of the show, laments.

That’s because Chinese fans who have been following American Idol through online video can no longer find it in the country’s cyberspace.

In an effort to curtail copyright infringement, Beijing recently shut down several hundred online video websites, blocking millions of netizens like Xiao Yu from foreign movies and hit shows.

The authorities have declared that foreign content can only be broadcast on the internet after the site operator obtains a licence for the programme.

Internet users around the country are reasonably upset. Prior to the crackdown, access wasn’t a problem. Take American Idol. The show is not imported into the mainland but was still widely accessible on the country’s online video-sharing websites.

The recent crackdown has also put the future of YouTube-like websites such as Youku.com and Tudou.com in question. Both have long been accused of offering pirated content uploaded by their users.

“We are dancing with a group of elephants,” was the rather cryptic response from Gary Wang, chief executive of Tudou. “If we don’t dance carefully, we could easily get crushed.”

Online video is big business, with an estimated audience of a quarter of a billion Chinese. Online video providers chase revenue from brand advertising around the content on their sites. Sales totalled Rmb162 million ($23.73 million) in the third quarter last year, says research firm Analysys. Analysts had expected that to grow fast.

Online firms are moving quickly in response to the directive. Baidu, China’s largest search engine, last week announced plans to set up a company that will work on a similar business model to Hulu, an advertising-supported video site in the US that allows users to stream licensed, copyrighted content from several television broadcasters for free over the net. Like YouTube, which is owned by Google (see page 5), Hulu is not available in China.

“As the country’s leading search engine, we’d like to grow in this space to meet our users’ needs. We see large volumes of our users searching for high-quality licensed videos,” says Ren Xuyang, vice president of marketing and business development at Baidu.

Ren claims that the Baidu site will be different from the competition because it will be the only website in China that solely offers licensed material, as opposed to user-posted content.

The announcement follows a similar move by Shanda, the online gaming company. According to the CBN Weekly, Shanda has signed an agreement to acquire Ku6.com, China’s third largest online video website. Ku6, partnering with Sohu.com, is thought to have invested up to $10 million to buy licenses to show Hollywood movies and TV shows. In addition, Ku6 is wiping the slate clean by pledging to remove all pirated video content from its site.

Youku and Tudou are also making a spirited fight back, promising to add more licensed content themselves. Youku recently secured $40 million in financing from private equity firms Chengwei Ventures, Brookside Capital and Maverick Capital. The new funds will go towards expanding its offerings of licensed professional video, says Youku CEO, Victor Koo.

Still, is Hulu’s licencing model going to work in China? “Americans usually watch content that is produced by 4 or 5 big production companies, so you can see a platform like Hulu create the financial agreements and lock up a good portion of content out there,” says Wang.

Chinese audiences are different. They watch Japanese, Korean, Hong Kong, Taiwanese and American shows, so there are plenty of production companies involved.

“I don’t see a possibility of anybody pulling off a trick like Hulu in China,” Tudou’s Wang says.

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