China’s consumers are paying to watch movies online, but foreign streaming giants are missing out

March 20, 2018
Industry News
Content Provided By:

Celia Chen
[email protected]

Tencent Video and iQiyi dominate China’s fast-growing online video streaming market, benefiting from a new generation of customers who are willing to pay to watch movies online

Ninety seconds is a long time for China’s digital-native generation.​

For Wang Shuai, 25, that is too long to wait for the advertisements to run out before he can watch his favourite movies and TV dramas on Baidu Inc.’s iQiyi streaming platform. So the Shenzhen resident paid 198 yuan (US$31) for an annual subscription that gives him the ability to skip the ads.

“It is quite cost-efficient, I can watch all the films and TV series on the platform,” Wang said. “Most importantly, the membership can exclude the 90-second advertisements before the videos. 90 seconds is too long for me.”

China has become a market where consumers are increasingly paying for online video content, a far cry from the days of pirated downloads. But it is a boom that foreign streaming giants like Netflix and Amazon are missing out.

Instead, the spoils are going to home-grown companies like Shenzhen-based Tencent Holdings, whose Tencent Video unit said Sunday it had 62.6 million paying subscribers as of the end of February, compared with 43 million in September. Its biggest competitor, Baidu Inc.-backed iQiyi, added about 10 million paying customers in the first two months of this year to reach 60.1 million. 

One out of eight Chinese internet video users now pay for online content and services, according to iResearch, marking a big change from years ago when most consumers favoured films on pirated VCDs and DVDs and those found on peer-to-peer movie-sharing sites. That shift, driven by a demographic change with the coming of age of the more affluent millennial generation, has contributed to the explosive growth in paying subscribers, with iResearch projecting the market will triple in size to 73 billion yuan (US$11.5 billion) in the five years through 2022.

Compared with the US, China still has plenty of room to grow in a country with a population of about 1.4 billion and 751 million internet users. The proportion of internet users who pay for video content has increased more than 10 times in four years, rising to 13.2 per cent in 2016, and is expected to further increase to 40 per cent in 2022, iResearch said. By comparison, Netflix’s US-based paying members represented around 28.1 per cent of total internet video users in the country as of the end of 2016.
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