The Mystery Of 56.com’s Shutdown: Beginning Of Chinese Government Takedown Of Video Sites?

imageIs the Chinese government taking down non-state-owned video sites? That seems to be the prevailing view of what caused the Chinese YouTube-like site 56.com to cease operating on June 3rd, according to WSJ. The site, which has received $30 million — a $20 million second round was closed last December — from early backers Sequoia Capital and *Disney* Steamboat Ventures, among others. Visitors to the site are greeted with a message in Mandarin indicating that 56.com is dealing with a simple server problem.

It could be the worst server problem in online video site history or… something darker could be at work. Last December, the Chinese government began handing down new rules designed to curtail non-state owned sites, which tended to ignore officials’ censorship demands. In what was seen as possible reprieve, Beijing said that some private video sites could receive licenses, but 56.com was never issued one. Neither has rival Chinese site Tudou, which just raised an additional $57 million two months ago. More recently, another Chinese video site Youku said it secured a $25 million third round.

The shuttering of 56.com has caused a great deal of uncertainty about the future of the nation’s quickly growing online video business. The peril that private video sites have been in since December didn’t sneak up on investors, who as the recent fundings show, have expressed confidence that Chinese regulators would not take an iron fist approach to the new businesses — overall, BDA China Ltd., a Beijing tech consultant estimates the top eight online-video sites have taken in at least $250 million funding as of last month. But with officials increasingly nervous about embarrassments as the August 8th opening of the Summer Olympic games in Beijing approaches, the government perhaps senses an opportunity to finally do away with what it regards as nuisances.

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