Online video firms to recover

Iqiyi.com Inc, the online video company largely owned by the Chinese search engine Baidu Inc, expects major players in the video industry to return to the black in 2014 as copyright costs drop significantly while they earn more from advertising.

Gong Yu, the company's chief executive officer, said on Thursday that the industry was likely to see considerable increases in its profits in 2015.

His remarks came after fierce competition and high costs caused Youku.com Inc and Tudou Holdings Ltd, once the biggest players in the industry, to merge into a single company, Youku Tudou Inc, earlier this year.

"The market will be further concentrated in the hands of the top players in the coming years," said Gong, referring to Youku Tudou Inc, Sohu.com Inc, Tencent Holdings Ltd, and Iqiyi.

Smaller players have been approached by these big companies over possible mergers and acquisitions, but no deals have been made so far, he added.

Gong declined to reveal whether Iqiyi is seeking any acquisitions, but said mergers and acquisitions can help boost a company's market share.

Zhao Xufeng, an analyst with the market research company iResearch, said the companies may return to the black even earlier.

She took LeTV, an online video website listed in Shenzhen, as an example. The company reported a net profit of 43.41 million yuan ($6.9 million) in the third quarter, up 49.7 percent from a year earlier. LeTV ranked a distant seventh in the market with a 6.5 percent share, measured by advertising revenues, according to the domestic research company Analysys International.

Youku Tudou Inc registered a net loss of $14.6 million in the third quarter, according to its financial report.

In the third quarter, Youku.com remained the biggest online video player in China, taking 21.2 percent of the market, according to Analysys International. Iqiyi followed with 10.3 percent and Sohu ranked third with 10 percent.

Tencent Holdings Ltd, China's biggest Internet company by sales, also expects its online video business to return to the black in a year or two, Alex Liu, general manager of Tencent's online video department, said in October.

Liu said its revenue in 2012 is expected to increase 450 percent year-on-year, compared with the 300 percent rise seen from 2010 to 2011.

Both Tencent and Iqiyi said they would intensify their efforts next year to attract users who watch videos on their mobile devices.

Gong said traffic from mobile devices has increased from 3 percent in December 2011 to 28 percent currently, and he expected the figure to rise to 35 percent.

But Zhao from iResearch said it will still take a long time for online video players to translate mobile traffic into revenue even though it is surging.