Hunan TV discontinues copyright sales to streaming sites

Exclusive streaming rights for variety programing have become extremely important this year. For instance, the third season of The Voice of China was bought by v.qq.com for 200 million yuan ($32 million), while, iqiyi.com purchased the streaming rights to five shows from Hunan TV: the second season of Where Are We Going, Dad?, Happy Camp, Tian Tian Xiang Shang, Your Face Sounds Familiar and Somebody to Love.

This investment by online video sites seems to be paying off. For example, foodmaker Yinlu Foods paid 66 million yuan ($10.5 million) to have its name attached to the beginning of the online episodes of the second season of Where Are We Going, Dad?, allowing iqiyi.com to earn back almost a third of what it spent to acquire the streaming rights to the show.

However, it looks like all this is about to change as the online streaming industry is about to undergo some major reshuffling.

Last Thursday, Lü Huanbin, the director of the Hunan Broadcasting System, announced through Hunan TV's official Weibo account that variety programs to which Hunan TV owns the complete intellectual property rights to will only be offered online through hunantv.com. A move indicating the station's determination to build its own online video platform.

Huge gamble

The impact of this move shouldn't be underestimated as Hunan TV produced some miracle hits last year. Both I am a Singer and Where Are We Going, Dad? witnessed record breaking audience ratings at the beginning and end of the year.

Other variety shows have also had their success stories. After buying the exclusive streaming rights to the second season of Zhejiang TV produced The Voice of China, tv.sohu.com received 2 billion views from 300 million users.

While the decision makers at Hunan TV are trying to ensure only they can profit from their own content this new strategy is risky. A report from the Legal Mirror estimates Hunan TV will lose out on at least 400 million yuan ($64 million) each year by discontinuing copyright sales to online video websites.

In an interview with huxiu.com, Zhang Ruobo, CEO of Happy Sunshine (a new media subsidiary of Hunan TV), said that the company had been planning this move since last year, and that the company wants to test their model this year with some new programs.

Divas Hit the Road, Hunan TV's latest seasonal reality show, which started on April 10 and airs on Friday nights, is one of these new shows. The results of the experiment seem to be positive so far, as the latest three episodes have brought a total of 59 million views to hunantv.com, with average viewership per episode far outpacing the averages of other shows on the site, and bringing over 10 times the website traffic and helping maintain an average of 3 million active users daily.

Numbers like these make Hunan TV confident that hunantv.com will be able to win back their online audience from other video sites. It is also an important factor as to why exclusivity is so important. For instance, the last three episodes of one of Hunan TV's more popular shows Happy Camp received an average of 16.7 million views on iqiyi.com, but only an average of 4.8 million views on its own site. Once the exclusive rights return to Hunan TV in 2015, potential viewer numbers look extremely promising.

However, content is still only half the battle. If Hunan TV wants to bring in a long-term audience it will also need to compete with other online video sites when it comes to things such as user experience. This of course will require improving things such as the number of servers, the site's user interface and multimedia terminal synchronization. Not an easy task when you take into account the fact State-owned TV stations have little advantage when it comes to capital and technology, something their private competitors, with their rich investors, have in spades.

A new trend?

Four days after Lü's announcement, Anhui TV posted a statement through its official Weibo declaring that any contract or clause related to the second season of the musical competition show Mad for Music were now invalid, thereby preventing any TV station or website from broadcasting the show without written authorization. This of course left many industry analysts wondering if other local satellite TV stations were preparing to follow in Hunan TV's footsteps.

This again comes down to content, an area where Hunan TV has a clear advantage. Taking a look at video sites such as youku.com and tv.sohu.com you'll notice that even older Hunan TV shows such as Happy Camp 2013 and Super Girl 2011 still rank high in viewership. However, only a few shows by other State-run stations such as Jiangsu TV's You Are The One and Zhejiang TV's The Voice of China are in comparable positions.

Advertising revenue is another factor. Statistics from the State Administration of Press, Publication, Radio, Film and Television show that while the national annual advertising revenue of broadcast stations reached a record breaking 130.2 billion yuan ($20.8 billion) in 2013, growth rates for that year only reached 2.52 percent. On the other hand, Internet advertising revenue is growing at an amazing pace, mainly by siphoning advertising revenue from broadcast stations.

This most likely is one of the main reasons that Hunan TV is looking to make a break from partnering with online video sites and standing on its own two feet.

It's still up in the air as to whether other stations will take the plunge, as the relationship between traditional TV stations and online video streaming sites is still very complicated.

Additionally, while some popular programs are able to bring in huge traffic numbers to a website over the short-term, comprehensive content is needed to keep it alive over the long-term. The way things are currently, even if a TV station were to put all of its content on its own site, that still might not be enough to satisfy Internet users.

Declaring independence

Despite the huge impact that Hunan TV's decision may have on the industry, most online video sites are remaining calm. Not only because the viewers that programs from a single station bring make up a relatively small part of their overall traffic, but also because they have already started to produce their own variety shows so as to decrease their dependence on TV stations.

Of all the various sites out there, youku.com seems to be a step ahead. Looking at the rankings of variety shows on youku.com, homemade videos and original shows made by or in cooperation with youku.com occupy half of the top 10 list. By exploring grassroots-level user generated content and inviting celebrities to produce their own talk-show series, youku.com has taken a step towards independence from traditional TV stations.

Meanwhile the changing habits of viewers who are now used to using mobile phones and tablets have changed the way content is made. Programs are shorter and more bite-sized, and filmed with the intention that it will be shown on small portable screens.

As such if traditional TV stations want to stay competitive, they have to do more than simply move their programing onto their own websites. In the end those sites that win and hold onto the largest amount of viewers will be the ones that can adapt to the changing preferences of Internet users.