China Online Films Surpassed Theater Releases by 5
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Posted On: 02/23/2017 8:56:21 AM
China Online Films Surpassed Theater Releases by 500 Percent in 2016
BY TRACEY XIANG FEB 8, 2017
For continued growth in China’s film industry, look to online film production and releases.
China’s 2016 box office fell well short of the expectations with growth a mere 3.7 percent from 2015, the first time in more than a decade that the growth rate slumped below 25 percent. Domestic films actually declined by 2 percent year-over-year in box office gross sales.
In sharp contrast, the market for Chinese “online films,” feature-length motion pictures for online release, saw explosive growth in 2016 in terms of both output and revenue.
More than 2,500 such online films, or 网络大电影 (also known colloquially as “网大”) in Chinese, were published on the major seven Chinese on-demand video streaming platforms in 2016, up 260 percent from the previous year, according to EntGroup, a local entertainment market research firm. The total number of theatrical films was only 423, including 92 imported titles.
iQIYI, an early entrant to this field, was the largest publisher in 2016 that released 1780 titles, up from 612 in 2015, according to EntGroup and iQIYI. Sohu Video, Youku-Tudou and Tencent Video were ranked second, third and fourth, respectively.
Most online films are on the revenue sharing programs of video streaming sites. Majors including iQIYI, Sohu Video, LeTV and Tencent Video have launched online systems where film providers can check their revenue shares in real time or on a daily basis.
Revenue sharing programs vary on different platforms. iQIYI, for instance, pays RMB 0.5 to RMB 2.5 per view to films on the subscription revenue-sharing program and RMB 0.5 to RMB 1 per view to those who take advertising revenue cuts, according to Yulezibenlun.
In 2016 iQIYI paid out a total of RMB 198 million (roughly US$30 million) to the top 20 grossing titles, compared to RMB 56 million in 2015 and RMB 6 million in 2014, according to the company. 山炮进城2 (Legend of 4 Idiots II) was biggest-grossing title on iQIYI in 2016, receiving RMB 18.3 million, up from RMB 9.9 million in the previous year. A total of RMB 30 million in advertising revenue was paid to 78 titles in 2016.
Subscriptions, as we discussed before, are an increasingly more important revenue source for Chinese on-demand video streaming services. The total number of paying subscribers in China surpassed 75 million in 2016, up 240 percent from the previous year and is estimated to reach 100 million in 2017, according to EntGroup. Total Chinese online video users reached 545 million as of the end of 2016, according to China Internet Network Information Center (CNNIC).
Of the total iQIYI subscribers who watched online films, 49 percent were aged 19 to 24 and 38 percent aged 25 to 30, with 70 percent being male, as disclosed by Dou Lili, general manager at the Internet Film Center of iQIYI at an event in April 2016.
Still at an Early Stage
China’s online film industry got started in 2013, and almost all of the existing online films are produced by local production companies or online video sites.
iQIYI started publishing films on its website after finding that “more than 600 films are made each year, but only around 300 of them make it to movie theaters. Many talented filmmakers don’t have an opportunity to produce movies,” Yang Xianghua, Senior Vice President of iQIYI, said in an interview with World Intellectual Property Organization (WIPO).
Unlike theaters, there’s technically no limits on the number of films online video sites can publish, and Chinese video sites are happy to add those films whose prices haven’t been driven as high as the average of online-published drama serials.
The much lower entry barrier as a result and the promise of revenue sharing have attracted hundreds of local companies to produce and distribute online films. Video sites have also begun making investments in this field or producing content in-house. iQIYI established an Internet Film Center in 2015, aiming to produce about 20 online-only films in-house per year, according to Yang.
Most of the existing online films are poorly budgeted. In the first half of 2016, 30 percent of titles cost less than RMB 500, 000, and the most costly 30 percent were budgeted between RMB 800,000 to RMB 1.5 million, according to EntGroup. It’s estimated that 10 percent of new titles in the second half of the year climbed over RMB 1.5 million in production cost. Lie Ling Shi, one of the most expensive, was reportedly budgeted at about RMB 6 million (less than USD 1 million).
So it’s not surprising that the average quality of the existing titles is pretty poor. It drew attention from Chinese regulators that resulted in the removal of dozens of titles that include allegedly unlawful content in November 2016.
122 titles on iQIYI platform received more than RMB 1 million in revenue sharing in 2016, with 23 earning more than RMB 5 million. Those titles are at least profitable considering their low costs.
But the vast majority of production companies couldn’t rely on revenue cuts from video sites to turn a profit or break even. Some tried to diversify their revenue streams through product placement, merchandising, among others.
It is expected that there will be big changes in this market in 2017 as increasingly more investment capital and veterans from the traditional film industry are joining in. In December 2016 iQIYI announced a deal with Sony Pictures Television to co-produce a three-part film serial and another one with American director Roger Corman to produce a sci-fi online film together with a team of Chinese filmmakers.
Disrupting the Conventional Theater Industry
Thousands of “private cinemas,” which provide small private rooms where consumers can watch online videos, have emerged across China in the last couple of years. The total number is believed to be approaching that of big-screen film theaters which were more than 7,000 in 2016.
Most of such private cinemas haven’t obtained licenses from copyright holders. A few claimed that their contents were licensed from Baofeng, a Chinese online video and smart hardware company, or 1905, a state-owned film website, according to a recent report by Yulezibenlun.
A widely reported copyright infringement lawsuit against a private cinema took place in September 2016 and the owner was sentenced to ten months in prison plus a fine of RMB 5,000. Private cinema was one of the major targets of China’s latest anti-piracy campaign that carried out in the second half of 2016, according to The National Copyright Administration of PRC.
But this business has obviously inspired some online video companies who have accumulated a large catalog of legitimate video content, either licensed from third parties or produced in-house.
In September 2016 Baofeng launched its private cinema chain BFC. iQIYI rolled out Yi Qi Kan Micro Cinema (not official translation) by partnering with a third-party company.
Both companies adopted the franchise model, providing franchisees with software and hardware products with their own content catalog built in.
Very soon the line between online film and theatrical film, online video-backed private cinema, and conventional film theater, will blur in China, if it hasn’t already. It’s has become common in China that local theatrical films will land on one or more video streaming sites after the first theatrical window. A few films managed to been simultaneously released online and in theaters last year.
Chinese major internet companies, including Tencent, Alibaba, and Baidu, each own a major video streaming site and have stepped into the film industry by either establishing their own dedicated companies or investing into leading local companies. They will play an increasingly more important role in China’s film industry and other entertainment content sectors.
— This article originally appeared on TechNode.
BY TRACEY XIANG FEB 8, 2017
For continued growth in China’s film industry, look to online film production and releases.
China’s 2016 box office fell well short of the expectations with growth a mere 3.7 percent from 2015, the first time in more than a decade that the growth rate slumped below 25 percent. Domestic films actually declined by 2 percent year-over-year in box office gross sales.
In sharp contrast, the market for Chinese “online films,” feature-length motion pictures for online release, saw explosive growth in 2016 in terms of both output and revenue.
More than 2,500 such online films, or 网络大电影 (also known colloquially as “网大”) in Chinese, were published on the major seven Chinese on-demand video streaming platforms in 2016, up 260 percent from the previous year, according to EntGroup, a local entertainment market research firm. The total number of theatrical films was only 423, including 92 imported titles.
iQIYI, an early entrant to this field, was the largest publisher in 2016 that released 1780 titles, up from 612 in 2015, according to EntGroup and iQIYI. Sohu Video, Youku-Tudou and Tencent Video were ranked second, third and fourth, respectively.
Most online films are on the revenue sharing programs of video streaming sites. Majors including iQIYI, Sohu Video, LeTV and Tencent Video have launched online systems where film providers can check their revenue shares in real time or on a daily basis.
Revenue sharing programs vary on different platforms. iQIYI, for instance, pays RMB 0.5 to RMB 2.5 per view to films on the subscription revenue-sharing program and RMB 0.5 to RMB 1 per view to those who take advertising revenue cuts, according to Yulezibenlun.
In 2016 iQIYI paid out a total of RMB 198 million (roughly US$30 million) to the top 20 grossing titles, compared to RMB 56 million in 2015 and RMB 6 million in 2014, according to the company. 山炮进城2 (Legend of 4 Idiots II) was biggest-grossing title on iQIYI in 2016, receiving RMB 18.3 million, up from RMB 9.9 million in the previous year. A total of RMB 30 million in advertising revenue was paid to 78 titles in 2016.
Subscriptions, as we discussed before, are an increasingly more important revenue source for Chinese on-demand video streaming services. The total number of paying subscribers in China surpassed 75 million in 2016, up 240 percent from the previous year and is estimated to reach 100 million in 2017, according to EntGroup. Total Chinese online video users reached 545 million as of the end of 2016, according to China Internet Network Information Center (CNNIC).
Of the total iQIYI subscribers who watched online films, 49 percent were aged 19 to 24 and 38 percent aged 25 to 30, with 70 percent being male, as disclosed by Dou Lili, general manager at the Internet Film Center of iQIYI at an event in April 2016.
Still at an Early Stage
China’s online film industry got started in 2013, and almost all of the existing online films are produced by local production companies or online video sites.
iQIYI started publishing films on its website after finding that “more than 600 films are made each year, but only around 300 of them make it to movie theaters. Many talented filmmakers don’t have an opportunity to produce movies,” Yang Xianghua, Senior Vice President of iQIYI, said in an interview with World Intellectual Property Organization (WIPO).
Unlike theaters, there’s technically no limits on the number of films online video sites can publish, and Chinese video sites are happy to add those films whose prices haven’t been driven as high as the average of online-published drama serials.
The much lower entry barrier as a result and the promise of revenue sharing have attracted hundreds of local companies to produce and distribute online films. Video sites have also begun making investments in this field or producing content in-house. iQIYI established an Internet Film Center in 2015, aiming to produce about 20 online-only films in-house per year, according to Yang.
Most of the existing online films are poorly budgeted. In the first half of 2016, 30 percent of titles cost less than RMB 500, 000, and the most costly 30 percent were budgeted between RMB 800,000 to RMB 1.5 million, according to EntGroup. It’s estimated that 10 percent of new titles in the second half of the year climbed over RMB 1.5 million in production cost. Lie Ling Shi, one of the most expensive, was reportedly budgeted at about RMB 6 million (less than USD 1 million).
So it’s not surprising that the average quality of the existing titles is pretty poor. It drew attention from Chinese regulators that resulted in the removal of dozens of titles that include allegedly unlawful content in November 2016.
122 titles on iQIYI platform received more than RMB 1 million in revenue sharing in 2016, with 23 earning more than RMB 5 million. Those titles are at least profitable considering their low costs.
But the vast majority of production companies couldn’t rely on revenue cuts from video sites to turn a profit or break even. Some tried to diversify their revenue streams through product placement, merchandising, among others.
It is expected that there will be big changes in this market in 2017 as increasingly more investment capital and veterans from the traditional film industry are joining in. In December 2016 iQIYI announced a deal with Sony Pictures Television to co-produce a three-part film serial and another one with American director Roger Corman to produce a sci-fi online film together with a team of Chinese filmmakers.
Disrupting the Conventional Theater Industry
Thousands of “private cinemas,” which provide small private rooms where consumers can watch online videos, have emerged across China in the last couple of years. The total number is believed to be approaching that of big-screen film theaters which were more than 7,000 in 2016.
Most of such private cinemas haven’t obtained licenses from copyright holders. A few claimed that their contents were licensed from Baofeng, a Chinese online video and smart hardware company, or 1905, a state-owned film website, according to a recent report by Yulezibenlun.
A widely reported copyright infringement lawsuit against a private cinema took place in September 2016 and the owner was sentenced to ten months in prison plus a fine of RMB 5,000. Private cinema was one of the major targets of China’s latest anti-piracy campaign that carried out in the second half of 2016, according to The National Copyright Administration of PRC.
But this business has obviously inspired some online video companies who have accumulated a large catalog of legitimate video content, either licensed from third parties or produced in-house.
In September 2016 Baofeng launched its private cinema chain BFC. iQIYI rolled out Yi Qi Kan Micro Cinema (not official translation) by partnering with a third-party company.
Both companies adopted the franchise model, providing franchisees with software and hardware products with their own content catalog built in.
Very soon the line between online film and theatrical film, online video-backed private cinema, and conventional film theater, will blur in China, if it hasn’t already. It’s has become common in China that local theatrical films will land on one or more video streaming sites after the first theatrical window. A few films managed to been simultaneously released online and in theaters last year.
Chinese major internet companies, including Tencent, Alibaba, and Baidu, each own a major video streaming site and have stepped into the film industry by either establishing their own dedicated companies or investing into leading local companies. They will play an increasingly more important role in China’s film industry and other entertainment content sectors.
— This article originally appeared on TechNode.
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