Is paid video a real trend or a false boom?

It is not new to develop membership payment business. In the past seven years before iQiyi and Sohu Video frequently brainwashed users, peers have been committed to this but have always been limited. It is an industry consensus that relying on the payment model to bring healthy cash flow to enterprises. However, this model depends on multiple factors such as user habits and copyright environment, and many of the above factors are not controllable by enterprises, and the same is true now.

New wine in old bottles

"The storm of paid video has arrived," iQiyi CEO Gong Yu (Weibo) mentioned this old topic again in June this year, which coincides with the time point for the scale-up of paid revenue predicted by Sohu Chairman and CEO Zhang Chaoyang last year.

It has been seven years since Jidong.com launched the paid video-on-demand service, but the number of supporters of the video payment model this time is the largest in recent years. "The market size of the paid revenue of the entire industry in 2016 is in the order of 1 billion yuan." Tencent Vice President Sun Zhonghuai has already calculated the size of the paid business of the entire industry.

Zhang Chaoyang, who showed his love for paid services directly, identified user paid services as the key development area for Sohu Video next year. Gu Yongqiang (Weibo), chairman and CEO of Youku Tudou, was more reserved. According to him, Youku Tudou will realize a change in its revenue realization model in the next three years, and will try to charge members and connect with e-commerce.

In fact, the entire industry has long been planning and looking forward to paid services. Jidong.com, the pioneer of domestic paid services that has transformed into telecom value-added services, claimed in 2011 that 75% of its revenue came from content payment. "Whoever charges will die" once became the default rule in the industry. Even so, video websites have never given up on paid services. Currently, almost every video website has launched paid services, each with signs such as "pay to remove ads", "pay to watch new movies", and "pay to enjoy high definition".

In addition, this strategic layout is mentioned by industry leaders every year, but in the face of keywords such as copyright price, copyright scale, marketing model, content linkage, etc., the word "pay" is not paid much attention, and video websites are even a little shy about it. In this regard, Gu Yongqiang's statement four years ago that "currently less than 1% of users will become paying users" seems to be an explanation. The disappearance of Xunlei Kankan's "Ruby Cinema" business, which was priced at only 1-2 yuan in 2010, can further prove the wavering mentality of practitioners.

Gong Yu, who was trying out user payment at the same time, still remembers the difficulties at that time. He told the media that the difficulties at that time were more about consumption and trial and error, and constantly accepting challenges. "It is very costly to try this, both in terms of money and time." Rampant piracy and weak willingness to pay are generally recognized as the two major problems that have hindered the promotion of video payment business in the past.

The explosion cannot be continued

As products become more legalized and online payments become a habit, payment models are ready to take off.

According to Youku Tudou's second quarter financial report this year, user business revenue from membership services, online interactive entertainment business and mobile game joint operation was 174.5 million yuan, a year-on-year increase of 596%. The explosion of the above businesses is mainly due to the growing acceptance of user services. During the period, Youku Tudou's user business revenue accounted for 12% from 3% last year.

Another listed company, Storm Technology, has seen even more astonishing growth in user business revenue. Financial report data shows that in the third quarter of this year, Storm Technology's VIP user value-added business revenue soared 2027% year-on-year to 7.35 million yuan, accounting for 5.56% of Storm Technology's operating income.

Another company that has also seen impressive growth is iQiyi, which has been pushing its paid services this year. As of June 15, iQiyi's monthly paid membership reached 5.017 million, a year-on-year increase of 765%. According to iQiyi's logic, the current number of paid members accounts for less than 1%, and there is huge room for revenue from paid services. Gong Yu even predicted that in about five years, the revenue from video payment will be on par with that from cinemas.

However, it is worth noting that Youku Tudou and Baofeng Technology, two listed companies, have publicly stated that the growth of paid business revenue is mainly due to the low base of paid users. Currently, advertising revenue is still the main source of income for video websites. In the second quarter of this year, Youku Tudou's advertising net income was 1.28 billion yuan, accounting for nearly 80% of the company's total revenue. In the third quarter of this year, Baofeng Technology's brand advertising revenue was 47.55 million yuan, accounting for 36% of its operating income.

In this regard, senior industry insiders said that the current growth in paid business revenue is indeed considerable, but considering the proportion of this business revenue, payment is still not large-scale, and it is hard to say whether the current explosive growth can be sustained.

However, Gong Yu believes that "iQiyi now has a little over 5 million users. I believe it will not take four years to reach the second 5 million, and the third 5 million may only take a quarter." At the same time, Sun Zhonghuai believes that "the growth rate of the paid business scale will not be lower than this year, and even if it is lower, it will only be slightly lower."

According to the financial report data, the company with the highest user paid revenue is LeTV, which is trying hard to enter the hardware market. According to the financial report for the first half of this year, LeTV's membership paid business revenue was 1.075 billion yuan, accounting for 24.1% of the total revenue. In the second half of last year, this revenue was 1.526 billion yuan, accounting for 22.38%. However, the difference between LeTV and Youku Tudou and Baofeng Technology is that the former adopted a software and hardware bundled sales model after launching Internet TV set-top boxes and TV products. It was not until late September this year that LeTV cancelled the bundled sales of hardware and membership content fees for the first time.

Sensitive period of pattern

In fact, the growing demand for paid video is closely related to the industry's profit dilemma. From early Tudou and Youku to later entrants iQiyi and Sohu Video, they are still struggling to make profits as online video business models become increasingly diversified.

The open fight for content copyright and the covert struggle for capital and traffic have plunged online video into a vortex of burning more and more money. After nearly a decade of fierce fighting, the video industry has witnessed the finalization of the pattern in e-commerce, games, group buying and other fields, but internal competition remains fierce.

It is worth mentioning that after Alibaba fully acquired Youku Tudou, the latter has more possibilities in business model. The combination of Alibaba and Youku Tudou traffic has built a resource platform for exploring video e-commerce models. Zhang Chaoyang recently made public comments on the video industry, "In terms of competition in content copyright prices, Alibaba's acquisition of Youku Tudou may lead to more irrational competition in this industry, and the content price environment may continue to deteriorate." In addition, the trial of film and television production and distribution, content marketing, and the derivation of the entire IP industry chain by various online video companies have all shown the urgent desire for profit in the video industry.

According to the data from the "China Online Video Market Quarterly Monitoring Report 2015 Q1" released by Analysys International, the advertising market size of China's online video market was 4.11 billion yuan, a year-on-year increase of 38.6%. Youku Tudou, iQiyi PPS and Tencent Video ranked the top three in the industry's advertising revenue, with market shares of 21.17%, 19.59% and 14.11% respectively. Beijing Business Daily reporters learned that due to the long-term stalemate in the industry, the frequency of market share reports compiled by third-party statistical agencies has also quietly slowed down.

Is it good for video websites to try the paid model during such a sensitive period? According to the White Paper on Online Video Personal Payment Industry, the proportion of online video paying users has increased by 11% from last year to this year, and the premise for achieving this figure is a year-on-year increase of 178.1%.

"However, even though the piracy problem has not been completely solved, and users' willingness to pay for videos has not been fully established, copyright competition is still fierce, video websites still have to try the possibility of a paid model from time to time, constantly stimulate and educate users, otherwise the concept of free videos will become more and more deeply rooted," analysts said. To this end, various online video companies are actively provoking users. It is understood that iQiyi will invest more than 50% of its funds and resources in developing user VIP membership business starting next year, and Sohu Video will add content to its paid items.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.