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Game changer

"Internet TV has revolutionized the way in which Chinese audiences receive information and entertainment in their living room," said Xie Wen, a Chinese IT expert and former president of Yahoo China.

"It is being seen as the new hope for those in the TV industry to win back audiences."

Research by TNS, a global leader in market research and business analysis, showed that the lack of diversified content and creative modes has led to the decline of traditional TV and boosted the development of Internet-based media.

"For traditional consumer electronics manufacturers, their job is done once they deliver a TV set to the customer. But for Internet-based media providers, our job has just started," said Yu Guangdong, vice-president for the search business of Internet company Qihoo 360.

"Internet TV has drawn a large number of Chinese viewers back to the living room, sitting in front of the television set. The refocus on the industry also brings more investment, covering operational costs and promising to help rake in more profits," said Zhang Yuxia, CEO of Future TV Co Ltd, a subsidiary of China Network Television, which is the online division of State broadcaster CCTV.

The emergence of Internet TV, combining services, facilities, video content and terminals, has obviously threatened the traditional profit model of the TV industry. That is prompting traditional TV set manufacturers to change their mindset and seek cooperation with online video providers.

From late last year, a group of China's leading TV set makers have joined hands with online video providers. Sichuan Changhong Electric Co Ltd teamed up with Youku.com, while TCL and iQiyi.com cooperated to produce Internet TV. Hisense Group announced it would work with 18 online video websites.

"The joint cooperation will provide advanced technology in producing TV facilities and innovative video services for users, helping to establish a positive cycle in the future," said Wang Zhihao, chief technology officer of Hisense Group.

Enhancing protection

Amid the development of IPTV and its related devices, government scrutiny over broadcasting via these channels is expected to increase.

Some IPTV and set-top box operators that provide online video, audio and gaming content as well as other applications have been urged to halt download channels involving third-party applications for unlicensed online programs and illegal content, according to the country's media watchdog.

That means that enterprises that want to provide set-top boxes and IPTV can only cooperate with the seven Internet television licence holders approved by the State Administration of Press, Publication, Radio, Film and Television - CCTV.com, bestv.com, the Hangzhou-based hzcnc.com, CRI Online, CNR Online, South Interactive Media and Hunan TV.

"The move affects not only government agencies and enterprises, but also users of the set-top boxes and IPTV," Xie, the former president of Yahoo China, said.

The crux of China's Internet TV broadcasting system - which includes players like program content service providers, integrated platforms, and terminal service providers - must maintain the core value of providing safe and positive content for consumers, said Luo Jianhui, director of the online audio-visual programs management department of the State Administration of Press, Publication, Radio, Film and Television.

"The latest moves are likely to squeeze out some Internet TV players, integrate Internet resources and standardize the content of programming for both traditional and Internet TV, making the industry focus more on enhancing the quality of programs and promoting the healthy development of China's TV industry", Xie said.

Xu Yiran, chief business officer of Perfect World, China's leading online game developer and operator, said that although the use of IPTV and set-top boxes is growing across China with a strong user base, there are still problems providing creative content and finding an effective profit model.

"There is still a lot of room for enhancing profit from online games, e-commerce and other entertainment in a wide range," Xu said.

"I believe it will be an irreversible trend of the TV industry to provide entertainment and information to users over the Internet.

"But the key point is to establish diversified content production and legally profitable modes as well as creative services for consumers."