Market Insight

Chinese internet TV giant Youku Tudou steps up original content production

June 18, 2014

Kia Ling Teoh Kia Ling Teoh Senior Research Analyst – Advertising & Television Media, IHS Markit

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Chinese online video company Youku Tudou is significantly increasing its production of original programming, with 20 programmes and drama series due to be released in the second half of the year. The new in-house commissions consist of reality shows, talk shows and drama series. The Nasdaq-listed company is increasing investment in its in-house production unit, before integrating its customised contents with animation, games, live interactive features and other services.

Our analysis

Considering the substantial viewership of online video in China - already of the order of 450 million - it is no surprise that online TV companies are trying to expand their business, either horizontally or vertically. This week's announcement from Youku Tudou shows the strategic importance of original programming to the company, including self-produced programmes, co-productions and user-generated content.

Youku Tudou started off in 2009 with low-budget video contents, targeting 15-to-40-year-old online video consumers. Website programs including Hip Hop QuartetsOld BoysOn the RoadInto Tibet and Surprise proved the business potential for original programming. Surprise achieved average views of 31 million per episode and attracted sponsorship from Mercedez Benz. A second season was co-produced with Hunan TV, On the Road was acquired and aired on CCTV, the national TV broadcaster.

Restrictions from the State Administration of Radio, Film and Television (SARFT) on foreign entertainment programmes are forcing Chinese producers to customise original content, rather than buying overseas copyrights. Youku Tudou is attempting to cover a broad range of genres, from documentaries and talk shows to drama series. In this case, Youku Tudou is at a privileged position where it can easily trace viewers’ consumption patterns to serve their requirements.

Cost efficiency is another reason behind the shift in investment focus. Rival online portal Sohu has shown the way by producing low-cost original content. Its web series, Dior Man was filmed with a majority of the roles played by Sohu staff with scenes mainly shot in its offices. Last month, game developer Chukong Technology partnered with Sohu to launch a mobile game adaption of Dior Man.

For all these reasons, in-house production of online video provider is expected to flourish, causing a significant transformation in China’s traditional TV. Website content will increase, with more co-production between TV broadcasters and online TV providers.

 

Geography
Asia Pacific China
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