Govt order may fray television set-top market

Illustration: Lu Ting/GT

Limiting online content access creates static for platform operators

Last week, the State Administration of Press, Publication, Radio, Film and Television (SAPPRFT) ordered two Internet television set-top box providers to cut off partnerships with several of the country's largest online video streaming platforms. If such heavy-handed government tactics become the norm, it could lead to serious repercussions for China's first successful crop of digital media enterprises, not to mention the broader domestic entertainment industry as a whole.

Specifically, the country's media watchdog demanded that Zhejiang Province-based Wasu Media Holding and Shanghai-based BesTV stop providing technical support that would enable its subscribers to access programs available on platforms such as Youku, Sohu and iQiyi, according to reports on industry portal lmtw.com.

The SAPPRFT billed this dramatic move - which effectively dams off a major source of content for the aforementioned TV set-top operators - as another strike in its campaign to eradicate "politically incorrect" and pornographic content from China's digital landscape. Although it is difficult to know for certain, this explanation may be just subterfuge to hide a parallel agenda: protecting the privileged position of China's traditional broadcasting outlets, many of which also operate their own digital content platforms. If such is the case, this would represent a violation of the government's ongoing campaign to liberalize and marketize sectors that have traditionally been dominated by State-backed enterprises.

As stipulated in Chinese copyright laws implemented in 2011, the right to communicate through the Internet is defined as "the right to make a work available to the public by wire or by wireless means, so that people may have access to the work from a place and at a time individually chosen by them."

Unlike traditional broadcasters which require viewers to tune in at certain times to see their favorite shows, most Internet TV operators provide a host of convenient services, including video-on-demand, by collaborating with online video platforms. It seems evident that such services deserve legal protection according to the terms of the laws mentioned above.

Moreover, streaming companies like Youku, Sohu and iQiyi have made major strides over recent years to obtain licensing and online broadcasting rights to popular video content. Therefore, it seems they should have every right to make this content available to set-top box operators like Wasu and BesTV.

The picture becomes far murkier though when one takes into account Guideline 181, released by the SAPPRFT in 2011, which dictates that set-top devices should offer access to only one Internet-based content portal. Not only that, but all such content portals must be approved by the SAPPRFT. It is impossible to deny that this administrative purview provides - at the very least - ample opportunity to favor State broadcasters and their digital video platforms. Indeed, CCTV's announcement that it would air "The Big Bang Theory" after its removal from local streaming sites suggests that administrators are inclined to skew the game.

This recent move by the SAPPRFT comes at a time many traditional TV stations are confronting the popularity of set-top devices which offer access to an ever-expanding library of quality online content. According to data from Guideline Research, a Beijing-based consultancy, domestic sales of TV set-top boxes hit roughly 19.5 million units by the end of the first quarter of 2014. The consultancy also estimates that sales could hit 40 million units by the end of this year. Separately, the value of China's Internet TV market is expected to exceed $1.3 billion by 2016, according to one recent study from Digital TV Research, an industry consulting agency.

While big State broadcasting groups are surely eager to carve out a piece of the digital action, policy controls that undermine fair competition will only weaken program quality and stifle technological innovation. Indeed, the current state of the industry suggests as much. Many of the most popular TV shows in China are either filmed and produced overseas or are merely localized reinterpretations of foreign shows, a fact which speaks to the shortcomings of traditional TV stations when it comes to creating attractive original content.

Opening up online cable and TV set-top services to a variety of different video platforms will not only diversify choices for viewers, it will spur stations to generate high-quality shows as well. Suppressing competition and the rights of online streaming sites will only create more problems for the industry. It is not hard to envision, for example, the emergence of an underground market for "unlocked" set-top boxes which offer unfettered access to popular video sites. Such an outcome would only erode the profits of manufacturers who play by the rules. As Chinese demand for digital entertainment expands, authorities should think carefully about what sort of market they want to create.