The Chinese online video market earned 1,19 billion yuan ($182 million) through membership fees on streaming sites during the third quarter of 2015, growing 256 percent over the third quarter of 2014, according to a report released by Chinese streaming site iQiyi on January 5.
Not only have online dramas like The Lost Tomb contributed greatly to bringing in paid VIP members to streaming sites, online films have also played a part.
More than 500 online films - movies longer than an hour and only released online - were available on streaming sites in China by the end of Q3 2015.
According to iQiyi's Research Report on the Chinese Film Industry 2015, only 259 of the 618 films produced in the Chinese mainland in 2015 were picked up for distribution in theaters. Considering the competitive environment for distribution, investors are less likely to take risks, preferring instead to support films featuring famous and experienced directors, scriptwriters and actors. This dependency on established names makes it difficult for new faces to succeed in the film industry. Fortunately less-costly online films provide an opportunity for industry freshmen to make their mark.
While budgets for theatrical releases usually reach at least 5 million yuan, online films are often produced for less than 1 million, can be made in 1-3 months and don't need to fight with other films to be scheduled for release in theaters.
Streaming sites earn money through two channels: membership fees and advertising revenue. Sites in turn pay online film studios a percentage of this revenue based on how many views the latter's films receive.
Online films are usually put behind a "members only" pay wall during their first 1-6 months online, during which time sites usually pay 2 yuan per view if a film is exclusive to the site or 1.5 yuan for non-exclusives. After this initial period, films are then made free for non-members to view along with paid advertisements.
If one of these films proves popular enough it can easily achieve a much higher return on investment than some theatrical releases.
For example, Daoshi Chushan (Lit: monk leave the mountain), a film with a very similar name to director Chen Kaige's movie Monk Comes Down The Mountain, is an online film that was made for only 280,000 yuan, yet earned 7 million yuan online.
According to the report by iQiyi, the main demographic for online films are male android device users between 19-30 years old.
