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Summary:

China’s online video service PPTV struck a strategic partnership deal with local cable TV provider WASU last week that could hold the key to finally bring online video to the living room in China. Android TVs and set-top boxes could also play a big role.

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Millions and millions of viewers, high-profile international partnerships, live audiences that dwarf Western competition: For years, it looked like there was little that China’s online video industry couldn’t achieve — except for reaching the living room. Strict regulation of TV services made connected devices off-limits, and companies who snuck their apps on set-top boxes had to deal with repercussions. Now it looks like this may be changing.

Last week at the Consumer Electronics Show (CES) in Las Vegas, China’s online video provider PPTV announced a strategic partnership with WASU Media Group. WASU is a local cable TV operator in one of China’s many provinces, but it has something really valuable for PPTV: A license to bring online video to the living room, which it has been using to bring triple play offerings to their customers. However, WASU’s license isn’t just restricted to the territory it works in. Instead, it’s able to launch online services on connected devices everywhere.

PPTV, which is also known as PPLive, has been trying to get into the living room for years. The company’s P2P video client is installed on 240 million PCs across China, and it has been adding some 30 million users with its iPad app and other mobile clients in recent years. The company worked on its own set-top box project some three years ago, but never shipped the device because China’s regulators were starting to crack down on similar offerings from competitors.

At the core of the issue is China’s complicated licensing framework, which requires that online video operators get separate licenses for addressing PC, mobile and connected TV usage. The TV space has been the most heavily regulated, and regulators have effectively been treating any video startup the same way they would treat an established cable TV operator.

The result has been that there hasn’t been a move towards streaming in the living room, as there has in the U.S. PPTV and WASU hope to change this by combining their efforts, while also securing a big share of the coming connected TV boom in China. Digital TV Research expects the Chinese online video market to grow from $50 million in 2010 to $1.38 billion in 2016, and connected devices could play a huge role in that growth.

The good news for PPTV’s competitors is that there are still other ways into the Chinese living room. Lenovo announced an Android-based TV set at CES, and Chinese CE manufacturers have been introducing countless Android-based set-top boxes in recent months. None of these devices has access to Google’s Android Market — which isn’t available in China — but consumers will nonetheless be able to install third-party apps from a variety of sources. This in itself could lead to a connected TV revolution within China, and possibly even force regulators to rethink their stance on online services in the living room.

Image courtesy of (CC-BY-SA) Flickr user x-ray delta one.

  1. A very timely article. In addition to a plethora of Android boxes coming available in China, there are rumors of a Chinese Android TV consortium coming up with a standard for multiple (chinese) app stores for TV. This would replace the current ideas to have (box/TV) “vendor specific” app-stores and create an app store standard, with a potential ambition to cross the china borders at some point. BTW, Lenovo was un-chinese enough to demo their android baby, there are many others doing android TVs (and dare I say, more advanced than Lenovo currently is) are didn’t care seeking eyeballs at CES.

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  2. Marketers seeking to reach the teen to young adult demographic in China should seriously consider incorporating online video on websites like Youku, Sina, Tudou and iQIYI. Online video is gaining popularity at a rapid pace, and will only continue to grow in importance for marketers in the years to come. According to iResearch’s latest data online video market size will grow from 6.27 billion yuan in 2011 to as much as 22.5 billion yuan by 2014 – this same figure increased by nearly 100% YOY from 2010 to 2011. This will certainly be an area to watch.

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