Chinese video portal www.56.com's decision to launch a dedicated pay and watch video website from yesterday has prompted mixed responses from within the industry.
The website yesterday launched its brand-new paid video platform, kankan.56.com, for people to upload and set a price for watching their videos. The website in turn will charge a 10-percent commission from the uploaders and also rank the videos according to the number of views.
"Just like Taobao.com, we will provide a platform for free trade and allow multiple payment options like Internet banking and Alipay," said Wang Jianjun, CEO, 56.com.
With sales of nearly 100 billion yuan in 2008, Taobao has an 80-percent share of the C2C market. Alipay is its third-party payment platform.
However, not everyone thinks the move is a good plan. Gu Yongqiang, CEO of www.youku.com, the biggest Internet video provider in China with a market share of 28.79 percent, said it was too early to start charging individual users. Youku will stick to its free model while allowing for the possibility of small charges to be levied if the content is exceptional and users are prepared to pay for it.
Agreeing with Gu, Wang Wei, CEO of www.tudou.com, said his website does not plan to charge individual users for the foreseeable future, but suggested a fee-paying system could be applied on access via mobile phones using Third-Generation applications.
"If I can get access to videos for free, why should I pay for them?" asked Pan Yiming, 25, a fan of Internet video, who said she would never pay no matter how little she was charged.
Like Pan, most individual users in China have been accustomed to watching online videos free. It means the websites have to rely on advertisements to offset their costs.
Although 56.com's advertisement revenue so far this year has increased more than four fold compared to the same period last year, Wang told China Daily it did not generate enough money to pay the copyright bills and hence had to develop a new business model.
The copyright on videos is normally limited to a specific period. If customers want to watch it after the copyright has expired, the website has to pay the producers again to extend it. Annual copyright payments at video websites often run into millions of yuan.
"Under the traditional model, a video will earn thousands of yuan a month only if it is played more than 100,000 times - but that's very rare," said Wang.
"The C2C mode will give producers more freedom to communicate with users directly and price their works according to their own producing costs," he said.
According to data released by China Internet Network Information Center, the number of Chinese Internet video users was 200 million at the end of 2008. It rose 10 percent in the first half of 2009. With a utilization rate of 65.8 percent, video has become the fifth most popular Internet application after music, news, instant messaging and search engines.
Six websites, youku.com, tudou.com, ku6.com, 56.com, joy.cn and 6.cn dominate the surging Internet video market with very little between them. Ranked fourth among them is 56.com with 14.5 percent of the market.
"The charging model is not a major problem," said Cao Fei, senior analyst, Analysys International.
Yu Guoming, professor of media economics at Renmin University of China, said it was necessary for websites to set up the platform and allow sellers and buyers to decide on the future course of action.