When online video platform provider Brightcove (s BCOV) filed for its IPO earlier this year, it spent a great deal talking about its international business. “We have established a global presence,” the company’s S-1 filing read, touting deals in Europe, Australia, Japan and elsewhere. Notably absent from the filing was any mention of China. Which is odd, considering that the company until recently maintained an office in Beijing, and was actively looking to hire in the country. So whatever happened to Brightcove’s China business?
A staff of two dozen – or no operations at all?
Ask Brightcove about China, and you’ll get a rather tight-lipped answer. “We don’t have significant operations in China,” I was told a few weeks ago by Brightcove President and COO David Mendels, who added: “We never made a decision to enter China as a market.” Mendels wasn’t very keen on talking about the subject at all, but to his credit, answered some of my questions anyway. His key point: There is no story about Brightcove in China. “Do we have a China strategy? The answer is no,” he told me.
That may be true today, but Brightcove’s past dealings in China were a lot less black and white. The company had a significant R&D staff in the country starting in 2006, which I’ve been told by someone with knowledge of the operation consisted of up to two dozen people. It tried to hire additional staff as late as March 2010 – only to shut down its entire operation in Beijing and completely pull out of China by the end of that same year. Most of the Chinese staff was let go at that time, and only a few made the transition to Brightcove’s corporate headquarter in Cambridge. (Medels and a Brightcove spokesperson didn’t want to comment on the company’s R&D efforts in the country.)
So why did Brightcove leave China? The company apparently told its Chinese staff that it wasn’t able to grow the team fast enough – but that seems an unlikely reason, given that many other U.S. companies maintain successful R&D operations in the country. The decision may at least in part been motivated by Brightcove wanting to take things further and sign up Chinese clients – only to realize that China is a tough market for outsiders.
China’s unique challenges
Mendels talked a little bit about this during our conversation as well. “It’s an interesting place,” he said, without specifically referring to anything Brightcove has done in the country. And he cautioned: “It’s a tricky place to do business in.”
That’s especially true for anyone in the online video space. China has a complicated regulatory environment for online video companies, which forces them to get multiple licenses for things that don’t require any dealings with the government at all in most other countries. Want to stream videos from a website to a desktop? Then you need to become licensed as an online video platform. Want to deliver the same video over the same network to a set-top box? That makes you a TV network, which means you need a different license.
Adding to this are unique infrastructure challenges. China’s Internet population is growing rapidly, but most users access the network with comparably slow connections, which is why local players oftentimes optimize streams for 500 Kbps to 1 Mbps. Servicing Chinese clients requires to adapt to these challenges, which can take time. Brightcove may have felt that it didn’t have this time, especially as it was trying to ramp up its internatinal business elsewhere, and prepared for an IPO.
Brightcove’s team is still there
The irony of Brightcove leaving China is that its former staff is now proving the company wrong: Most of Brightcove’s employees have since been hired by Video-TX, a local video platform provider that openly references its Brightcove heritage on its website.
The company, which received a strategic investment from the Chinese CDN Chinacache soon after Brightcove left the country, has been offering Chinese customers what Brightcove could have offered – and was able to sign up a number of high-profile clients including the Shanghai Media Group, the large newspaper China Daily and state TV network CNTV. I’ve been told that there is no ill will against the former employer amongst the team, but there is an acute sense that this could have been done by Brightcove as well. Said one person involved in both efforts: “We didn’t set out to build our own company. We set out to build Brightcove China.”
This isn’t to say that Brightcove made a terrible mistake leaving China. Rather, Brightcove’s adventure in China goes to prove that the country can be a lot more nuanced than it is perceived in the U.S. Stories about U.S. companies doing business in China often fall into two categories: Either, they describe a gold-rush-like opportunity – or a repressive regime that companies should avoid entirely. Brightcove’s experience is much closer to the actual experience many have when doing business in China: It’s a complicated market that requires a long-term commitment – and not everyone has the stomach to stick around.