1. Analysis and Forecast of
Online Video Industry in
China
LEE Ki Kei 1155037783
GONG Jiaolei 1155037583
XUAN Muyun 1155037643
YANG Yanwen 1155039321
ZHANG Yuemiao 1155037586
4. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
The Classification
A: The online video
sharing and web
portal
C: The leading video live
website
B: The leading P2P
player platform
3
5. The Users
5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Chinese online
video users will
reach
483 million
account for
around 69.3%
of its total
internet users
4
6. 32
1
1
2
3
Decentralization of Copyrighted Material
Soaring Price of Legitimated Material
Remains of the Hotbed for Pirates
Chinese-style Copyright Market
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
5
7. Structure
5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Number of Buyers and Sellers
Barriers to Entry for New Firms
Vertical Integration
8. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Number of Buyers and Sellers
Key Buyers and Sellers
Content
sellers
Key video websites
players
Users
TV stations
Content Production Firms
Program distributors
7
9. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Number of Buyers and Sellers Buyers
In November
2013, around
8 million
monthly covered
users.
57%
43%
users of online video webpages
users of online video PC client
8
10. Number of Buyers and Sellers Sellers
Key video
websites players
0
50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
Top Most-Popular Chinese Video Website
Unique Monthly Visitors
9
5 Prediction2 Structure 3 Conduct 4 Performance1 Background
11. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Barriers to Entry for New Firms 1. Capital Barriers
Minimum
registered capital:
20 million
Capital intensive
industry
Concentrated
market --> C4&C8
analysis
10
12. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Barriers to Entry for New Firms 2. Technological Barriers
Technology-
Intensive
Industry
11
13. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Barriers to Entry for New Firms 3. Governmental Regulations Barriers
Required license
authorized by
central
government
Audio Video Service
Permission by SARFT
Internet Culture Operation
License by MCT
Internet Content Provider
License by MIIT
《增值电信业务经营许可
证》
《跨地区增值电信业务经
营许可证》
《短消息服务接入代码使
用证书》
12
14. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Vertical Integration 1. Internal Integration
The Merger of
Youku & Tudou
in March 2012
An alliance
between two
giants
Competition
absolutely NO.1
13
15. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Vertical Integration 2. Integration of Industry Chain
The Merger of
LeTV and Huaer
in March 2014
LeTV: Internet video
website
Huaer: a TV series
production
company, which is famous
for its sensational drama
“The Legend of Zhen
Huan”
14
16. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Vertical Integration 3. Cross Industry Integration
In Nov 2012, Baidu acquired dominant stake in
online video firm iQiyi, buys out ex-Hulu investor
Providence.
SDO game bought Ku6.
Renren, a social network website, bought the
online stream website 56.
SUNING, a private owned retailing
company, bought pptv.
15
21. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 1: Platform Provider (UGC) since 2005
Strength
a. Less cost pressure
from legal drama
b. Avoid
homogenization
20
22. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 1: Platform Provider (UGC) since 2005
Weakness
a. Permanent advertiser
problem
b. Users’behavior
problem
c. Copyright problem
21
23. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 2: Buy Copyright (Exclusive Show) since 2009
Definition
Online video companies
v.s.
TV station
Filmmaking company
Content company
……
22
24. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 2: Buy Copyright (Exclusive Show) since 2009
Current Situation
3.7 billion
<EntGroup consulting: copyright of online video white book > 2013.9
中國好聲音3
250million
爸爸去哪兒2
200million
我是歌手2
100million
23
25. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 2: Buy Copyright (Exclusive Show) since 2009
Content focus of some online video corporation
24
26. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 2: Buy Copyright (Exclusive Show) since 2009
Weakness
a. Cost > revenue
b. Gamble
a. Periodic issue
b. Homogenization
25
27. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 2: Buy Copyright (Exclusive Show) since 2009
Weakness
d. Homogenization
group buying, 2012
Why do you choose these websites?
26
28. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 3: Original Program (transformative UGC) since 2009
Definition
27
29. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 3: Original Program (transformative UGC) since 2009
Current Situation
a. Customers’habit
b. Revenue
28
30. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 3: Original Program (transformative UGC) since 2009
Current Situation
Top 10
LeTV: 5
Sohu TV: 3
Youku: 1
Tencent TV:1
29
31. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 3: Original Program (transformative UGC) since 2009
Strength
a. Low cost, more profit
b. Flexible schedule
c. Fast spreading
d. Customization and
interaction
“Excellent
original
drama/programs
may attract ten
times the flow of
copyright drama.
--- Gao Fei, President of
LeTV
30
32. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 3: Original Program (transformative UGC) since 2009
Weakness
a. Evaluation risk
b. Profitability?
c. Transformation of
buying model?
31
33. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Product Strategy Phases 4: Hardware (Internet TV) since 2012
Definition
Self-making
Co-operated with
hardware companies
Other companies from
Internet Companies
(threatens)
Other
companies
initiated
self-
producation
o-operated
with
hardware
company Ai qiyi TCL
Internet
TV
Ailibaba Skyworth
CooCaaTV
Xiaomi
32
34. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Investment
Research
Vertical
merger
New
technology
Technology
Main Aspects
33
35. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Pricing Conduct
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013e 2014e 2015e 2016e 2017e
Others
Viewer Payment
Copyright
Distribution
Advertising
<iResearch-China video website white book> 2013
2010-2017 China’s Online Video Industry Revenue Constitute
Where does the
money come from?
34
36. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Pricing Conduct 1. Advertising Model
Definition
video site
ads
video-
frame ads
pre-video
ads
pause ads
coner sign
ads
product
logo ads
seed ads
rich
media ads
35
38. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Pricing Conduct 1. Advertising Model
Weakness
a. Relation with length
of ads
b. Three-party software
c. Online retailers:
tangible flow
37
39. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Pricing Conduct 1. Advertising Model
Opportunities
Current model:
CPM (cost per thousand)
New model:
Charging by effect
Small to
medium-
sized corp.
+
Online
retailers
Location
+
Time
(golden
period)
38
40. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Pricing Conduct 2. Copyright Distribution Model
Definition
Video website
Copyright owners
Other video websites
39
41. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Pricing Conduct 2. Copyright Distribution Model
Current Situation
Diluting cost
Reducing risk45.63%
36.54%
10.04%
7.74%
0%
LeTV 2013 Semi-Annual Revenue
Advertising
Copyright Distribution
Viewer Payment
Hardware
Others
40
42. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Pricing Conduct 2. Copyright Distribution Model
Weakness
Homogenization
41
51. Status Quo Main Performance Indicators
Performance
Market
Size
User
Behavior
Advertising
Behavior
Main Performance
Indicators of
Online Video
Companies
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
50
52. Status Quo
Total revenue
reached
12.8 billion Yuan
in 2013. Still has
large potential
value-added space.
Main Performance Indicators 1. Market Size
2010 2011 2012 2013
Revenues(bn Yuan) 3.1 6.3 9 12.8
%YoY growth rate 78.10% 100.10% 43.90% 41.90%
0
2
4
6
8
10
12
14
Revenues(bnYuan)
Revenue of China Online Video Industry
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
51
53. Status Quo
Online video service
occupies people
huge amount of time
with small market
share.
Main Performance Indicators 2. User Behavior
358
51 35 31 28 27 24 23 22 22
0
50
100
150
200
250
300
350
400
Monthly Active Time in January 2014
Monthly active time
(million hours)
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
52
54. Status Quo
Top three advertising
sections almost
occupied 50% of
advertisement
volume.
Main Performance Indicators 3. Adverting Behavior
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
53
56. Economic Efficiency Profit vs. Market Share?
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
“I’m not saying
that online video is
not profitable. Our
companies want
market share better
than profit at this
point of time.
55
57. Profit The Milestone of Achieving Profitability
Non-GAAP Net (Loss) Profit (Thousand) For the Three Months Ended
December
31, 2012
(RMB)
December 31,
2013(RMB)
Net loss (113,570) (24,581)
Add back: share-based compensation 38,779 53,061
Add back: business combination related
expenses
127 -
Add back: amortization of intangible assets from
business combination
12,411 15,723
Non-GAAP net (loss) profit (62,253) 44,203
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
Youku Tudou
Inc., became
the first company
achieved profitability
in the whole online
video industry.
Income diversification and cost control
56
58. Profit The Turning Point
It may be a turning point of gaining profit.
2 Structure 3 Conduct 4 Performance1 Background 5 Prediction
57
60. Subscription Model
Corporation Based on
Original Program
Hardware Trend
5 Prediction2 Structure 3 Conduct 4 Performance1 Background
New Revenue Model 59
61. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
New Revenue Model Corporation Based on Original Program
More business
model can be
launched through
original program-
Cooperation with
brand（Soft
implants）
For example: Miss.
Paofu & Birdnest
采购内容 自制内容
60
62. More mergers and
acquisition.
Be more likely happened
cross industries.
5 Prediction2 Structure 3 Conduct 4 Performance1 Background
More Integration 61
63. 1
2
3
4
1
2
3
4
Acquisition an existing one is far easier
to start one from zero.
To obtain the newest
technologies.
To go public.
To expand market share.
5 Prediction2 Structure 3 Conduct 4 Performance1 Background
More Integration Reason 62
64. Is there any chance for foreign online
video websites to enter Chinese
market? Or maybe the mainland’s to
go globally?
Exports? Import? China
Imports and Exports 63
65. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Imports and Exports Imports
Strictly
censorship
(even the
TV series)
Local
protectionism
64
66. 5 Prediction2 Structure 3 Conduct 4 Performance1 Background
Imports and Exports Exports
Website itself
hard to
practice (even
South Korea)
Easy for the
content or
the facility
65
