Lurk
Secret History of Princes Taiping
Lurk
The competition to buy copyrights for TV dramas is common for video websites, as most sites lack original programming. The copyright fee for TV drama Secret History of Princes Taiping, which just finished broadcasting on Hunan Television Station in April, hit 50 million yuan ($7.95 million) for 45 episodes, setting records.
This price was set last year between Hunan TV and iqiyi.com, one of China's leading video websites. But the tides may be turning. During the Beijing spring television program introduction meeting, held from March 26-28, few domestic video websites had intentions of spending that much to purchase copyrights for TV dramas. With the high cost and pressure of seeing profitable margins, many video websites are seeking new solutions.
"This year, even the most popular TV dramas saw a decline in their prices, at least 50 percent," said Ma Ke, responsible for the copyrights of films TV shows for sohu.com, one of China's leading video websites.
Online boom
Video sites offer loads of films and television series, both domestic and international. With Internet TV in China booming, many are scrambling to buy licensed content. During the rise of video websites, the copyright fees for TV dramas skyrocketed accordingly.
In 2006, the popular comedy My Own Swordsman was sold at 100,000 yuan for 80 episodes. In 2008, one of the most popular TV dramas that year, 30-episode-long Lurk (Qianfu), sold its copyright for 10,000 yuan per episode.
The list only continues: In 2010, the copyright fee of serial drama Three Kingdoms, directed by Gao Xixi, amounted to 150,000 yuan per episode. Capture the Mind or Gongxin was sold at 30 million yuan for 38 episodes, in June. Sohu.com paid 30 million yuan for exclusive website broadcasting right for the remake of Princess Pearl, with 98 episodes, in July.
Last September, Up and Down, or Fuchen, which will be broadcast in June this year, became the first TV drama to sell at one million yuan per episode.
Fading frenzy
"It was panicked buying last year," said Zhang Yuxin, a senior manager at iqiyi.com. "Every one rushed to buy the rights to distribution, without considering whether it was worth it or not."
After years of demand by domestic video websites, this trend to purchase copyrights is declining.
"Low transactions of TV dramas and low prices are this year's trend," said Ma Ke. He said that last year, TV dramas of Hunan Television Station, reputable for its hit shows, would have once easily sold for one million yuan per episode. Figures have since declined to 300,000 yuan to 400,000 yuan per episode.
"Less popular TV dramas are now begging [to be bought]," he said.
Unaffordable costs
Online video websites are disgruntled with the high price tag, thinking of other solutions to navigate around it. For example, three major video websites including iqiyi.com, sohu.com and tencent.com have united in purchasing copyrights and sharing resources with each other.
"Sharing resources of the copyrights among video websites forces the price to stabilize," said Liu Chunning, vice president of tencent.com. "This can set the industry on a healthy track." Liu said that though copyright fees for TV dramas have declined, prices are still unfair.
Video websites rely on three methods to make a profit broadcasting TV dramas on their websites: advertisements, copyright distribution (applicable when a website buys the exclusive copyright of a TV drama to distribute to other buyers), and paid service.
As paid service is not accepted by Chinese audiences, domestic video websites rely mostly on advertisements and copyright distribution. Surging prices of copyrights are an increasingly heavy burden with unprofitable returns. Industry insiders predict that iqiyi only made 10 percent back, through advertisements, for Secret History of Princess Taiping.
Gong Yu, CEO of iqiyi admitted that this purchase came at a loss. "The higher the price (of the copyright) is, the more you will lose," he said.
"It's a bad cycle. Copyright fees bring in a small advertisement income," said Ma Ke. He predicted that the record price of one million yuan per episode of a TV drama will not happen again.
Survival strategies
Ma suggested that video websites should be more critical in buying copyrights and only choose those that will attract a large online audience. Some shows have limited success on internet TV, and more research should be conducted to track numbers.
Video websites should purchase copyrights from producers at a low price and then share the advertisement income brought by the shows broadcast online, according to a previously agreed proportion.
Iqiyi.com tried this model early this year. According to Zhang Yuxin, this reduced the pressure of buying copyrights.
Sharing copyrights is another effective way to reduce costs. As mentioned, iqiyi, sohu and tencent agreed to share the cost of buying and the resources of the copyrights. According to the publicized agreement, each of them will contribute one third of the cost when buying copyrights to TV dramas. Nine dramas have been purchased.
Exchanging copyrights is another solution, done by determining which copyrights are exclusive and which are more open. At the end of 2009, ku6 joined sohu.com in cooperatively buying copyrights; in February 2010, youku.com and tudou.com followed suit.
As prices of copyrights still haven't stabilized, strategies to lower costs while getting a share in the industry are still being debated by video websites.