Dilemma of China’s long-video streaming platforms and ways to break out

  1. iQiyi, Youku and Tencent rely heavily on the financial support of their shareholders Baidu, Alibaba and Tencent Holdings, respectively, which infuse significant capital for content production capex every year in order to remain competitive. As a result, all the companies invested much more capital than they should, which led to excessive competition in the whole market.
  1. In September 2020, the penetration rate of the short-video industry was 74.5%. The number of paid users (PUs) and MAU of short videos are forecast to continue to grow in the future, but this is less likely to squeeze the margins of long-video names, as these two types of players may prove to be complementary to each other.
  1. Obtaining advance from customers for enabling early access to programmes. In August 2019, Tencent launched ‘The Untamed’ — a 24-hour-early-access function. More than 2.5m people paid for this facility, bringing RMB75m in advances.
  2. Producing talent shows. The table below provides four reasons long-video players enjoy producing talent shows.
  1. Long-video players should make content themselves.
  2. Although the purchase of external copyright content is paramount, long-video players should give topmost priority to the quality of their own content. Producing premium and exclusive content is the best way to increase PUs, while the continued growth of PUs will likely directly drive revenue growth.

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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/