Could a teenaged girl from Liaoning province have caused the temporary shutdown of 56.com, one of China’s leading video-sharing websites? Probably not, but the video she posted of herself complaining about attention given to earthquake victims, may have attracted official attention.
Questions are now being asked about the future of China’s video-sharing sites, which are often backed by foreign venture capitalists seeking a “Chinese YouTube.”
Elias Glenn, an analyst at consultancy JLM Pacific Epoch, said the State Administration of Film, Radio and Television (SARFT), whose mandate includes internet media, turned its attention to video sites because users – like Liaoning Girl – were posting “sensitive” videos.
Initial crackdown
The media regulator and the Ministry of Information Industry (MII) stepped up oversight of video sites last year when they announced that only majority state-owned sites with a SARFT-issued Online Audio-Visual Broadcasting License would be permitted to host videos. Existing sites were excused from the ownership requirement, but were subject to a government content-review process.
In June, SARFT published a list of 247 licensed sites. Conspicuously absent were China’s three largest video sites, Youku.com, Tudou.com and 56, although industry watchers downplay the omission’s significance.
“It sounds more scary than it actually is because a lot of [the approved sites] are government websites,” Glenn said.
Given the opacity of the licensing process, the precise reasons for the big three being left out are unclear. But they and their investors seem untroubled.
Shortly after the list came out, Youku announced it had received US$40 million in new venture funding from firms like Brookside Capital Partners, Sutter Hill Ventures and Farallon Capital, despite not having a license at the time. Its license has since been awarded. Youku CEO Victor Koo said the company discussed the licensing issue with its investors.
“It doesn’t start or end with getting a license. The real crux of the matter is [our] content review and approval,” he said.
Tangos Chan, who runs the blog China Web2.0 Review, said content review relies mostly on human power. And Koo said Youku’s content was never intended to be completely supplied by its users, echoing others in the sector.
“We don’t view ourselves as the YouTube of China because we are as much an online video platform for professional video content as we are for amateur video content,” Koo said.
Rival site Tudou was shut down by SARFT for a day in March for hosting objectionable content.
“There was specific content spotted during the [license] review process,” said Anita Huang, the firm’s vice president of community and marketing. “There can’t be any vulgar, sexual content, there are restrictions about copyright … everything about the Olympics is very sensitive.”
The shut-down, and the lack of a license, didn’t prevent Tudou from announcing US$57 million in new funding in April. Huang said foreign investors like Tudou for its long experience in video-sharing – the site was launched in 2005 – investment in bandwidth and wide brand recognition.
You-tuber of China?
Tudou is also diversifying its content and is buying copyrighted material. Huang expects the company to transform into a platform for publishing copyrighted videos, in addition to sharing approved content posted by users.
But China’s video sites are still unprofitable because advertising revenues can’t cover high server and bandwidth costs. As a result, not all foreign VCs are enamored.
James Mi, managing director of Lightspeed Venture Partners, said his firm is staying away from online video in China because of its unproven revenue model. He said the new ownership requirements raise barriers to foreign investment and government policy is a concern.
Tudou’s Huang, however, welcomes the government’s latest moves.
“We feel that actually the government authorities are on their way to becoming more open,” she said. “You just need to play by their rules.”
