From Corporation, page 28, issue no. 350, Jan. 14th, 2008
Translated by Zuo Maohong
Original article: [Chinese]
Despite new reguations that have some in the industry panicking, it's business as usual for Youku.com, one of the leading Chinese video sharing sites. Its CEO, Gu Yongjiang, just signed a long-term lease for its new office in Zhongguancun, Beijing's technology hub.
New rules requiring state affiliation for online video and audio sharing sites, which will take effect on January 31st, seemed not to have affected Youku. Gu seems unfazed—as he puts it, Youku.com is "clean" enough, adding that it's "not a bad thing" for the government to publish such rules.
In fact, Gu is not the only one who is optimistic. Network watchdogs are unlikely to sink the whole industry in one fell swoop, says the public relations manager of one media portal site. Most online video providers claim they are now just waiting for the corresponding implementation guidelines.
Who's the Target?
According to Regulations on Online Audio and Video Sharing Services co-issued by the Ministry of Information Industries (MII) and the State Administration of Radio, Film and Television (SARFT) half a month ago, online audio and video sharing providers must obtain a certificate of qualification before they can continue operating. The fundamental condition for applying for such a certificate is to be "state-owned" or a "state-holding" firm.
According to one manager of an online video sharing website, the new rules, which aim mostly at websites with pornography, politically sensitive content, or those producing their own videos, are actually not as serious as have been imagined by related companies.
"For example, sports videos won't be influenced much," says the source, adding that the move might have been impelled by "the recent upsurge of pornography content of online videos".
According to Gu, Youku.com has submitted information as has been required by MII, including introduction to the company and censoring procedures. "I believe regulatory bodies did this simply to create a better network environment rather than to suppress online video companies." he adds.
Wang Wei, CEO of tudou.com, noted that how to concretely interpret and observe the new rules will require further explanation from SARFT. Li Shanyou, president of ku6.com, said that the company will obey any regulation and is now also waiting for detailed implementing guidelines.
One senior manager in the industry told us that since the government has defined online videos as media, it will work to strictly control the industry. They say that the "state-owned or state-holding" requirement hopes to prevent people from funding websites with the purpose of disrupting society.
According to Liu Yan, CEO of 6.cn, watchdogs are open to new media, and have already realized that it's only practical to use it rather than to force it out. For example, the government let online videos play a more important role in advertising for the communist party during the 17th CPC National Congress. Drafters of the congress' documents were invited to 6.cn to give filmed lectures on party theory, which was broadcast to millions of times.
Awaiting More Details
When asked whether itv.ifeng.com is continuing its operation after January 31st, Liu Shuang, the president, refused to comment. Some sites have said that the Provisions don't allow enough time for applying for the certificate.
What related companies can do now is to continue work as usual while waiting for detailed regulations, which will be released at some still uncertain time—some say by the end of January, others say in two to three months.
If all the rules in the Regulations are to be 100 percent implemented, the deepest concern for these companies would be the purchasing price.
Venture capital investors say that most existing video sharing websites are funded by venture capital, and will bear great losses during the partnership process. This is because state-owned enterprises allowed by SARFT wouldn't offer a high price. For another, the time limit—before January 31st--has a negative effect on further negotiations. But no matter how low the price must be, these sites have to be sold, as they have no other way to survive.
This investor further reveals to the EO that those have invested in the industry are now panicking, as there have been such examples before: after similar policies came into effect, a mobile video content provider was once sold to a company under CCTV at what they called a "horribly low price".
Meanwhile, the industry has been searching for ways to "satisfy" the regulatory bodies.
Gui Wei, in public relations department of Sina.com, tells the EO that early last May, the company allied itself with China Telecom, with its video sharing site having been undertaken in cooperation with the latter. And a source at Sohu.com, China's biggest portal, also says the company has already worked in cooperation with CCTV. For them, it's only a procedural question to meet the new requirements.
Sites will work out the problem, says Yang Mei, chief public relations officer of Chinabb.tv. The new rules are more likely to be looser than have been anticipated, since it's unrealistic to require a state-holding background of all the video sharing sites. "Whenever there's a rule, there's a countermeasure. We'll find a way when the implementing details are published," says one experienced venture investor.
The new policy might be good news to those already in the industry, as it adds a new barrier to entry, says Gu.
"Those who haven't invested are being even more prudent. Online video business fever has been swept the country these past two years, now the new policy is making people cautious," says one investor, adding that most investors in the industry are waiting until after January 31st before making any more moves.
