Mainland web giants to buy video content jointly
Mainland internet giants Sohu, Tencent and Baidu are teaming up to buy video content together, in the hope of beating down the price.
The three firms said the copyright cost of an episode of new television soap operas hit 'a million yuan' (HK$1.23 million) last year, up from 'tens of thousands of yuan' in 2009.
The move follows last month's merger between the country's two main online-video-service companies, Youku and Tudou.
While the agreement was signed by the video arms of Sohu and Tencent, Baidu was represented by its video-sharing website iQiyi, which operates independently.
The three firms said they would set up a video-content co-operation mechanism and 'make prices return to the rational level'.
Popular content is hugely important to any site that streams videos, but prices have been rising faster than that of real estate on the mainland. Cao Di, an analyst at online market research company iResearch, said: 'Content cost has at least doubled in the past couple of years.'
Youku's annual results show it spent 240 million yuan to buy content last year, compared with 82 million yuan in 2010.
However, Cao said: 'The alliance between the big players in the industry will not help bring down high content price in the near term.'
He said that in order to survive in the face of the spurt in costs, content sharing and exchange between video portals had become commonplace on the mainland. 'These three companies have just raised it to the level of formal corporate co-operation.'
Cao said it was not clear if the three erstwhile rivals would pool money to buy video rights and gain a group price, or if they would buy content separately and then share.
He said it was hard to estimate how such an alliance would help cut costs. 'I don't know if the content they acquire together will be exclusive,' he said, adding that the price of exclusive rights to popular television soap operas was so high these days that the three were unlikely to seek them.
Gong Yu, the chief executive of iQiyi, said: 'Although the price [of video rights] is falling this year, there is still some distance to go before they can reach rational market levels.'
Zhang Fan, at domestic research firm Analysis International, said he expected the alliance between the three big players would challenge Youku-Tudou's leading position.
'The space for small and medium-sized companies has been further compressed,' Zhang said.