Tencent loses 50 million yuan after glitch offered VIP video access for 0.2 yuan a month

Technical error offered one-month subscription for a hundredth of the original price. Tencent has now swallowed the US$7.7 million cost of the blunder after social media outcry

PUBLISHED : Monday, 08 January, 2018, 3:58pm
UPDATED : Monday, 08 January, 2018, 10:41pm

It seemed an attractive offer: a one-month subscription to China’s most popular video-streaming platform for 18 yuan, a 10 per cent discount on the usual 20 yuan.

Indeed, hundreds of thousands of internet users rushed to take advantage of the special New Year offer for VIP membership of Tencent Video.

But then the deal became even more alluring, thanks to a technical glitch. When they went to pay, subscribers were astonished to find they were only charged 0.2 yuan – a hundredth of the original monthly fee.

The numbers suggest this phenomenal – and entirely accidental – offer was simply too tempting for many to resist signing up again … and again, and again. In fact, 390,000 users between them took out 2.87 million subscriptions, an average of more than seven each.

The fact Tencent Holdings was offering an alternative, three-month membership for just 58 yuan would seem to indicate most of these subscribers were motivated by the errant membership fee.

The glitch has proved a costly one for Tencent, who have now agreed to soak up the loss of just over 50 million yuan (US$7.68 million) – the amount they would have made from 2.87 million subscriptions at the intended 18 yuan rate.

Tencent is first Asian company to top US$500 billion in value, joining Apple and Facebook

The Shenzhen-based technology giant initially refunded those customers affected and offered them a three-day VIP video service subscription for free as compensation.

But that decision drew fierce criticism from users, who took to social media to vent their anger. Many accused the company of lacking integrity and complained that their calls to Tencent’s customer services department had gone unanswered.

On Friday, under intense pressure, the firm announced it would waive the fee entirely for those users who had subscribed to the one-month VIP offer, according to an official statement posted on Tencent Video’s WeChat account.

That effectively means the 390,000 subscribers will enjoy 2.87 million months of VIP membership free of charge, and a loss of 51.66 million yuan for Tencent, which in November became the first company in the region to achieve a market capitalisation of over half a trillion US dollars.

Tencent Video, iQiyi in race to lead China’s online video market

The company did not immediately reply to enquiries from the Post regarding the cause of the technical glitch and the reasons for approving the one-month subscriptions free of charge.

The special offer over the New Year period was an attempt by the technology juggernaut to expand the user base of Tencent Video, which is fast becoming a key revenue channel. The company is in fierce competition with a number of similar video platforms in China including Baidu’s iQiyi and Alibaba-backed Youku Tudou.

Tencent’s fast-growing online video streaming unit has helped its net profit in the quarter to September surge 69 per cent to 18 billion yuan, up from 10.6 billion yuan in the same period last year.

Tencent Video has more than 43 million paying subscribers, which the company estimated was the largest of any similar platform on the mainland.

“We believe [Tencent Video] has become China’s top online video platform in terms of mobile daily active users and subscriptions,” Tencent chairman and chief executive Pony Ma Huateng said in the quarterly results statement.

QuestMobile data in June suggested that Tencent Video and iQiyi are neck-and-neck as leaders in the online video-streaming market in China with 423 million and 422 million users, respectively. They are followed by Youku Tudou with 277 million.