BEIJING—China is clamping down on DVD imports that Chinese Internet companies use to circumvent government controls on showing foreign movies and television shows online, according to people familiar with the move.
The new rules, which Chinese officials are expected to detail to Internet companies in about a month, mark the latest effort by China to tighten its grip on what its people watch as online video streaming sites surge in popularity.
While Beijing limits Chinese video-streaming sites to ensuring that no more than 30% of their content emanates from overseas, Internet companies have used a backdoor that gives them the right to stream extra foreign shows online that aren’t counted in the quota, the people said. When a distributor gets a government license to physically import a TV show or movie, usually in the form of DVDs and Blu-ray discs, it is also permitted to post the content online, the people said.
Soon, China’s top media regulator will cut the number of import licenses for physical media like DVDs—currently more than 1,000 titles each year—and will require that importers state whether the physical media being imported is also going to be posted online, the people familiar with the new rules say. It isn’t clear if this content will be counted as part of the quota.
The new policy—expected to be released next month and take effect in January—is the latest step by the nation’s rulers to control what people are able to watch, and limit overseas influence. Western shows such as “The Big Bang Theory” and “Game of Thrones” have surged in popularity among Chinese viewers along with explosive growth in online video sites.
Legal DVD sales are practically nonexistent in China, where major movies and shows are widely available through illegal downloading services and bootleg disks, as well as a newer generation of video websites that offer legal content.
The new rules represent a blow to China’s Internet companies as well as Hollywood studios looking to capitalize on the massive Chinese market. China represents a vast audience, with 461 million people watching video online, according to official data. Chinese Internet giants Tencent Holdings Ltd. and Baidu Inc. are among the biggest providers of online video content.
The regulator and spokespeople for major video-streaming sites owned by Tencent and Baidu Inc. didn’t respond to requests for comment. Spokespeople for major Hollywood studios including Universal Pictures and Paramount Pictures didn’t respond to requests for comment. Sony Pictures Entertainment declined to comment.
The media regulator—formally called the State Administration of Press, Publication, Radio, Film and Television—late last year told Chinese video-streaming sites that foreign content could make up no more than 30% of their available content. At the time, foreign shows made up more than half of the TV content of popular video sites such as those run by Youku Tudou Inc. and Sohu.com Inc.
The regulator in recent months told Chinese video-streaming companies to suspend some titles put online under a physical import license, say people close to the video sites. It also required them to submit the titles to the agency for another round of censorship, people familiar with the order said.
Earlier this year, censors yanked an environmental documentary called “Under the Dome” after it became a viral hit, while they also warned a popular news site to clamp down on information that officials consider rumors. Censors have even targeted cleavage on popular shows.
China’s Internet giants are plowing more money into video to reach the growing online audience. Alibaba Group Holding Ltd. is paying about $4.6 billion to acquire the stake in major video-streaming site Youku-Tudou Inc. it doesn’t already own.
Hollywood studios also see major potential as video-streaming sites compete to buy and stream legitimate content. Baidu’s iQiyi.com arm has recently signed an expanded online streaming deal with Universal Studios for library titles and with Paramount Pictures for online broadcast rights of 800 films and feature movies. Tencent last November struck a deal with Time Warner Inc.’s HBO to offer content including “Game of Thrones,” and it recently acquired from Metro-Goldwyn-Mayer Studios the exclusive online rights in China to the complete James Bond franchise. Financial terms weren’t disclosed.
But China’s opaque approach to censorship often leaves the industry guessing as to what it can and can’t do.
"It rains when heaven deems fit,” said one executive with a Hollywood studio, adding that even the fluctuating diplomatic temperature between Washington and Beijing can influence censorship rules.
Video sites are allowed to show only content that has been censored and cleared to show in theaters, to be broadcast on TV or to be imported in the form of DVDs or other physical media. Content approval for import via disk and other physical media is cleared by the General Administration of Press and Publication, which two years ago was merged with the main film and television regulator.