ENGLISH EDITION OF THE WEEKLY CHINESE NEWSPAPER, IN-DEPTH AND INDEPENDENT
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The Turning Point in the War Against Piracy
Summary:



Corporation, page 30
Issue 496, November 29
Translated by Guo Wei
Original article:
[Chinese]

Internet copyright prices reached new highs after November. "The New Princess Pearl" is priced at around 200,000 yuan an episode. At this rate, the online airing rights for a television series with 40 to 50 episodes could reach millions of yuan.

Just a year ago, the highest price for a network copyright was about 5,000 yuan; two years ago, it was a few hundred yuan. The chief executive officer of Zhejiang Dongyang Tianshi Cultural Broadcast Limited (Dangyang Tianshi), Shi Zhong remembers that time clearly. Recent copyright changes have not been limited to the prices.

Price Setting Powers

Earlier this year, when Dongyang Tianshi had just been established, Shi Zhong worked as a middleman, looking to sell copyrights he had purchased from series producers to video sharing websites. At the time, purchasing directors from video sharing websites quoted a price first, and then told you to take it or leave it.
"They did not care about our costs, and it was useless to negotiate with them. They had all the power in their hands." Shi Zhong claimed.

In April 2009, the State Administration of Radio, Film, and Television (SARFT) issued the Notice for Reinforcing the Management of Online Audio-visual Programmes Content which made it illegal for movies, TV series, animations, and documentaries to be shared online without the proper copyright.

Shi Zhong saw a golden opportunity for his copyright distribution business. The policies were in place, and most video sharing websites were turning a profit, so he set up Dangyang Tianshi, aiming to distribute online copyrights.

He did not realize that respect for copyrighted content was still far away. Large video websites would make an offer, but the price was never up for negotiation. They always had the final say, and if you failed to match their offer, the deal was off. They would carry on using pirated material until it was discovered. Video sharing sites preferred to regularly upload and remove pirated material rather than buying the copyrights.

"For them, everything was about costs. The only thing they cared about was keeping costs low." Shi said.

Shi sometimes found video sharing websites using pirated videos in violation of the copyrights he owned. He could only request that they remove the videos. Shi said, "I could not sue them, because there are a few video websites, and they are my customers. I could not make them look bad."

In the second-half of last year, the popular Chinese internet portal Sohu and Ku6, an online video sharing site, united to form an anti-piracy alliance that punished other websites for infringing on their copyrights. The move caused online copyright prices for television shows to increase dramatically. Prices for network television series' reached as high as 100,000 yuan per episode. But the prices were too high for the market to accept, and they soon fell again.

By the beginning of this year, legal, copyright-abiding content represented only 5 percent of all television dramas and film available on the internet.

Turning Point

But now, the market is changing. News that Tudou and Youku will acquire IPOs spread quickly, giving hope to copyright distribution companies. Initial Public Offerings (IPO) would bring in more funds, which would further encourage websites to purchase legal copies. The change could push the whole industry toward embracing copyrights.

On November 12, SARFT issued "Suggestions for the Protection of Intellectual Property," measures meant to aid the State Council in cracking down on pirated copies and fake goods. This is the latest in the State Copyright Bureau, SARFT and the Ministry of Public Security's joint blitz attack on internet piracy.

Shi's expectations were not high. Since 2004, many policies on combating piracy have been issued, but have failed to make substantial progress in the war against illegal uploads.

But things did change. From October, the prices of online distribution rights rose dramatically and reached levels the same levels as early 2010. After Sun Shine bought the new "The Dream of the Red Mansions" for the sky high price of 10 million yuan, averaging 200,000 yuan per episode, they paid 13.8 million for the new "Romance of the Three Kingdoms" and prices rose even further in response.

A source with Beijing Glory Sunshine Culture Dissemination Ltd. Co. (Sunshine) told a journalist that the online distribution business is booming. Before, the rights to a movie or video drama would be bought by eight or nine video websites at the most, but recently, rights to the new movie Zhao's Orphan was sold to 15 video websites, and this was just "the first round" of sales.

Sunshine is the biggest distributor of online copyrights in the new media market, and it was bought by Shanda in September. Another change was that the main video websites actually deleted their pirated videos after being asked to do so.

Thunder, a popular download manager and BitTorrent client, removed pirated versions of American TV series. Video sharing websites such as Tudou no longer upload pirated American series like "The Big Bang Theory" and "Desperate Housewives". Sohu bought the rights to "Desperate Housewives," and later licensed the rights to Youku, owned by Walt Disney Company. The era of mass piracy seems to be drawing to a close.

The New Model

The big market changes that took place in November remind Shi Zhong of an incident earlier this year. Although there were risks in buying the copyright distribution of mainland series, Korean dramas never let him down. Even though their costs are high, Korean dramas are extremely popular.

When the market dipped, Shi went to SBS TV Korea station's Beijing office, and asked to buy the online copyrights for their dramas for the next three years. It turned out that Shi was told that Sohu and Sunshine had already offered to buy the copyrights, and had outbid Shi. He then had to make a better offer.

Aside from copyright distributors, video streaming sites are also willing to negotiate the purchasing the rights to Korean television dramas and films. They can sell or lease the distribution rights to other sites.

Tudou, which recently filed for an IPO, embraced copyright distribution as a new part of their income. In October, the company saw significant gains; the fiscal report from letv.com showed that in the first three quarters, Tudou's income increased 66.96 percent, and the income from copyright distribution was a big driving force.

Shi Zhong gradually came to accept the situation, and became an agent for distributing copyrights to video sharing websites. He thinks that collaboration between copyright distributors and video websites is a good way of dealing with networks. It may be a good place to start figuring out the best purchasing pattern.

After he signed the contract with SBS TV Korea for the rights to SBS Korean Dramas for the next three years, Shi contacted the Phoenix Angel Korean Drama Club, a non-profit organization formed by Korean Dramas' fans all around the world. They subtitle the Korean shows in Chinese, and then upload them on the internet.

Originally, the contract said SBS TV Korea would provide the master tapes with Chinese subtitles, but Shi thought the process was too slow. In order to put every episode of Korean dramas on the Chinese website as soon as possible, he reached a cooperative agreement with the Phoenix Angel Korean Drama Club.

Korean dramas never make lose money; their gross profit is around 10 to 20 percent, and it is rapidly growing, Shi said.

Since the purchase cost is growing, some copyright distributors and video websites are trying to make their own films and television programs. Content production can circumvent copyright payment and potential litigation restrictions, and can also streamline broadcast, advertising, production and distribution.

Union Voole Technology has produced two movies, Heaven Eternal, Earth Everlasting and The Butcher, The Chef, and The Swordsman. Shi Zhong said that copyright distributors do not make money from TV business itself, but can relieve the massive pressure from producers. Additionally, copyright distributors can profit from digital TV, VOD requirements, their own websites, copyright distribution, and DVD releases.

This article was edited by Ruoji Tang and Rose Scobie

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