If one of the best measures against piracy is to make content more easily available in a legitimate format, then Warner Bros. (NYSE: TWX) has made a key move in combating the problem in China. It has signed a deal with the country’s first pay-TV service, YOU On Demand (YOD), to deliver video-on-demand and pay-per-view films from the Warner catalog via cable and IPTV services in the country. The companies say it is the first deal of its kind for a major Hollywood studio. There is a catch, though.
YOD — which bills itself as “HBO before Showtime” in terms of its exclusivity and singularity in the market — says it has yet to line up any cable operators with which to partner to offer the service.
But such is the hype and potential of the large Chinese market — there are 200 million households to target — that YOD notes in its release that “based on conversations going on” with providers, it expects to have a footprint of around three million subscribers — on par with Cablevision (NYSE: CVC) in the U.S. — by the end of this year.
It also helps that YOD is entering China under a 20-year exclusive contract from the government to run national VoD services. Like other foreign companies entering the Chinese market, it will do this via a joint venture — in this case with the Chinese broadcaster CCTV-6 and its pay-TV arm, China Home Cinema.
Under the terms of the deal, Warner — the studio that is behind such mega-blockbusters as the Harry Potter series — will start delivering titles in the Chinese market by this summer. It has not yet said how many titles, and which ones, will be the first to go live.
To entice users, YOD claims that the films will be sold for the same price that people would typically pay for a pirated version of the same film. Of course, they won’t get to keep a physical DVD to watch again and again, or resell to others.
And it remains to be seen whether this move is too little, too late in a market now overrun with a multitude of ways of getting to see movies, either by buying those pesky pirated DVDs or via many routes online. (One of the potentially most interesting, Xunlei, which counts the CEO of News Corp. (NSDQ: NWS), Rupert Murdoch, as an investor, is preparing for an IPO in the U.S. Read our story on that here.)
And there are other VoD plays already underway in the country. DOXTV works with NDS to roll out push VoD services in specific regions; the latest was with the China Cable Network in Hainan province. Sony (NYSE: SNE) Pictures also tells us that it has had VoD deals in place in China since 2005.
Still, it’s a sign of how slow moving the film industry really is — and how frustratingly closed the Chinese market can be — considering that it has taken this long to iron out a legitimate national VoD deal for such a booming market like China. The news was timed to coincide with a visit from the MPAA chairman Christopher Dodd — the first visit he has ever made to China.
YOD rebranded from its original name of China Broadband in January 2011, although it is still publicly traded under the ticker CBBD in the U.S. Last week, Fidelity Hong Kong took an equity stake in the company. YOD also plans to have a Nasdaq listing later this year.