Report: China Has 60% of Top Global SVOD Services by Subscribers

Government restrictions in China have stymied attempts by Netflix and Amazon to launch subscription streaming video service in the erstwhile Communist country with nearly 1.4 billion people.

As a result, new data from Ampere Analytics found that three domestic Chinese SVOD platforms iQIYI (backed by Baidu), Youku-Tudou (backed by Alibaba), and Tencent Video (backed by Tencent) now represent three of the top-five SVOD services globally by subscribers.

Historically, Chinese SVOD services were different to Netflix by focusing on ad-revenue. In recent years there has been a shift toward ad-free SVOD. By the end of 2018, the three leading Chinese streamers generated $8 billion of revenue — compared to Netflix’ $18 billion.

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By investing heavily in content, the three SVOD services have optimized their revenue composition. Between 2011-2018, iQIYI’s content costs grew by 140%, according to Ampere.

Subscription income was just 4% of total revenue back in 2011; by 2018, it had ballooned to more than 50% of its total revenue. Paid subscribers have privileged access to more exclusive content than the free-tier subscribers.

Investments in content have enabled the Chinese SVOD services to build large content catalogs. Youku-Tudou leads with 13,000 titles, followed by iQIYI at 10,000, and Tencent Video at 7000.

Catalog size is the main point of differentiation as the platforms offer a similar wide-range of content across TV series, movies and reality shows aimed at a mass-market audience.

Service stacking is common, as a result of the original and exclusive content on offer. iQIYI offers 250 original and 1000 exclusive titles, while Tencent Video has 330 original and 1400 exclusive titles.

Ampere says 44% of Chinese Internet users subscribe to two or three services, and 16% to all three. So, while the demographic targeting by the three giants may be consistent, the differentiation happens at the point of delivery through the content offered.

The report expects the continued growth of Chinese SVOD by the big three players as they continue to be buoyed by significant financial backing.

This has enabled iQIYI, Youku-Tudou and Tencent Video to expand rapidly, in addition to exclude smaller local players from entering the marketplace. The domination is further secured by the strict regulatory environment in China, which prevents international players such as Google operating there.

We expect the big three SVOD players in China to continue growing and reach 340 million subscriptions and $12.6 billion in total revenue by the end of 2024,”  analyst Orina Zhao said in a statement. “Investing heavily in content will continue as the main strategy to drive subscriptions and increase user retention.”

China’s Tencent Partnering With Paramount on ‘Bumblebee’ and ‘Top Gun’ Theatrical Releases

Tencent, the Chinese multinational entertainment conglomerate, Dec. 5 announced a partnership and co-financing deal with Paramount Pictures for the studio’s upcoming Bumblebee theatrical release, in addition to next year’s Top Gun sequel featuring Tom Cruise.

Tencent, which operates numerous entertainment ventures in China, including Netflix knockoff Tencent Video, separately filed a $1.4 billion IPO for its Tencent Music branded streaming service.

As an investor and co-marketing partner, Tencent Pictures will assist with the marketing and promotions of Bumblebee in mainland China. Hasbro, creator and owner of the Transformers brand on which the film franchise is based, is also a co-financier on Bumblebee.

Starring Hailee Steinfeld (Pitch Perfect 3The Edge of Seventeen), John Cena (Blockers, Trainwreck), and Jorge Lendeborg Jr. (Love, Simon, Spiderman: Homecoming)Bumblebee is an Autobot character set in 1987 as a prequel to the Transformers franchise.

Bumblebee represents Tencent’s first international project after Warner Bros.’ Venom and its first collaboration with Paramount. Other Hollywood domestic collaborations include Warcraft, Kong: Skull IslandWonder Woman, La La Land and Ready Player One.

“Tencent’s involvement in many high-profile international projects has demonstrated its strong capacity in marketing campaigns in China,” Jim Gianopulos, CEO, Paramount Pictures, said in a statement.

 

China’s Tencent Video Touts 62.5 Million Subscribers

In a subtle effort to undermine Netflix’s tepid foray into China, Tencent Video, the erstwhile communist country’s largest SVOD service, March 18 issued a press release in the United States touting its subscriber prowess.

Tencent said it surpassed 62.5 million subscribers at the end of February – 18% more than Netflix’s 52.8 million domestic subs at the end of December 2017.

The service reported 43 million subs at the end of last September. Tencent also generated 137 million average mobile daily active users in the fourth quarter of 2017.

Citing third-party research, the service said it covered 790 million video streaming devices in January 2018 – nearly 100 million units more than the next service. It streamed 80% of the top 20 most popular TV dramas in China.

Netflix last April inked a license deal with streaming platform iQIYI (20 million subs) after standalone attempts to enter China failed due to government regulators.

Indeed, Disney’s upstart OTT video platform, DisneyLife, was pulled by regulators as was buying movies on iTunes – the latter lasting just seven months after launching.

Tencent said it has built its sub base on local content, Dolby Vision, Blu-ray (1080p resolution) and interactive screen, among other features.

The TV dramas include “The Nothing Gold Can Stay,” “Candle in the Tomb,” “Country Love Story,” “The Eternal Love,” and “A Love So Beautiful.”

“At Tencent, we always endeavor to offer superior user experience and member services,” Thirty Sun, VP of Tencent and CEO of Tencent Penguin Pictures, said in a statement.