Hollywood’s biggest film studios are working with Tencent, one of China’s largest internet groups, on a Netflix-style streaming service that aims to beat piracy by delivering new films to homes across China just two weeks after their US theatrical release.
Warner Brothers has a minority stake in Tencent’s Hollywood VIP service, which streams older films from several studios on a subscription basis but also makes new titles available to rent online for as little as $1.
Warner Bros’ latest hit 300: Rise of an Empire is among the titles available to rent; the film is still showing in cinemas in the US and other markets.
Valued at $130bn, Tencent is the world’s fourth-largest quoted internet group after Google, Facebook and Amazon, operating a vast social media, ecommerce and gaming platform used by more than 500m people a month. More than 100m people pay to play its social games or use WeChat, its mobile messaging app.
Hollywood VIP launched quietly at the end of 2012 and has attracted “a few hundred thousand” subscribers, according to Tencent and Warner Bros. However, this is the first time they are making new films available.
The service has hundreds of titles, showing a mix of Chinese films and Hollywood fare: Walt Disney recently began licensing its films to the service, joining Universal Pictures, Miramax and Lions Gate Entertainment.
The aim was to transform a market where digital film piracy is rife by giving consumers a legitimate way to watch new films, said Ron Sanders, president of Warner Bros worldwide home entertainment distribution.
Hollywood has consistently failed to overcome intellectual property theft in China, missing out on hundreds of millions of dollars in sales as pirates sell copies of brand new films on DVD or online.
“How can we truly say we are frustrated with China not buying our content if we won’t make it available in the time appropriate for the consumer market place?” said Mr Sanders. “We have a long way to go but this new model could be applicable for other markets.”
Tencent is using its other digital businesses to promote Hollywood VIP: WeApp customers will be able to share films with each other using the messaging app, for example.
“In the western world movies go through a very clear windowing process,” said James Mitchell, chief strategy officer at Tencent. “They appear in theatres and then a few months later they move to DVD, then later they move to online distribution services.
“In China, windowing hasn’t really developed so we thought there was an opportunity to get movies [to audiences] in a way that was more timely.”
Netflix, which operates in the US, Europe and Latin America, is close to reaching 50m subscribers but it is unclear how big a streaming service could become in China.
“In China historically there hasn’t been the training of paying for in-home entertainment in the same way [as the US],” said Mr Mitchell. “We’re about people who were not paying for movies and the benefit is they get a better experience.”
The US has a more mature video-streaming market, with Netflix and Amazon vying for supremacy in the living room. Amazon last week struck a deal with Time Warner’s HBO to gain access to some of the pay-channel’s most popular shows, such as The Sopranos and The Wire.