Capital pours into licensees; Internet TV competition enters 3.0 era

May 12th is the listing date for the 287 million shares issued by Wasu Media (000156.SZ) to Alibaba's affiliated company "Yunxi Investment". Due to the three-year lock-up period, these shares will be officially listed and circulated on May 12, 2018.

So far, the operating companies under the seven major Internet TV licensees in China have basically been "divided up" by outside investors: Tencent has invested in Future TV, Youku Tudou has invested in China Media Group, iQiyi has invested in Galaxy Internet TV, Lenovo has invested in Shanghai Shiyun Network, etc.

Wu Chunyong, an expert on the integration of three networks and editor-in-chief of Fusion Network, told the reporter of China Business News that among the seven major licensees, only Mango TV is still "single" and is seeking to go public. After the intervention of external capital, Internet TV will enter the 3.0 competition stage.

Licensees attract foreign investment

The craze for smart TVs continues to ferment in the capital market and consumer market this year. Color TV companies need to expand from "selling hardware" to "selling services", and the radio and television system needs to extend from "collecting monthly rent" to "selling content". Internet TV is naturally expected to be highly valued. Between content providers and color TV companies, Internet TV licensees are an unavoidable link. Therefore, the seven domestic Internet TV licensees have become the "hot cakes" that Internet and IT giants are competing to cooperate with.

On March 24, 2010, the State Administration of Radio, Film and Television issued the first Internet TV license to CNTV (China Network Television ), a subsidiary of CCTV, and Future TV was responsible for the operation. Future TV has three major shareholders: CCTV International Holdings holds 60.2%; Tencent holds 19.9%; and China Digital Universe Technology Co., Ltd. also holds 19.9%.

In March 2010, Wasu Media, with Zhejiang TV and Hangzhou Radio and Television as the applicants, also obtained an Internet TV license. On May 11, 2015, after the completion of the additional issuance, the equity of Wasu Media changed to: Wasu Group held 41.85%; Yunxi Investment (co-funded by Jack Ma and Shi Yuzhu) held 20%; Zhejiang Second Light Industry Group held 6.91%; Hunan Qianxilong Investment held 6.84%; Shanghai Yuancang Investment held 4.97%; the other five shareholders were Dongfang Xingkong, Zhejiang Development, Beijing Guanghua 267 Enterprise Management Company, Shanghai Jingxian Investment, and Shenzhen Fuwei Venture.

In July 2010, Shanghai Radio and Television Station also obtained an Internet TV license, which was operated by BesTV (600637.SH), a new media company under SMG. The Shanghai Shiyun Network Technology Co., Ltd., which is responsible for the project, is a joint venture, with BesTV holding 51% and Lenovo holding 49%.

China Radio International obtained an Internet TV license in December 2010 and is operated by China Media Group Guangdong. China Media Group Guangdong was established in November 2006, and its shareholders include China News Media (000793.SZ) and China Radio Global Media. In July 2014, Youku Tudou's parent company Heyi Information Technology (Beijing) Co., Ltd. invested 50 million yuan in China Media Group Guangdong, holding 16.6667% of its shares; at the same time, China News Media's shareholding in China Media Group Guangdong was adjusted to 36.8171%.

In March 2011, Guangdong TV Station was the applicant for the license. Southern Media Internet TV's "Internet All Directions" integrated service platform and "Cloud Audiovisual" program content service platform passed the inspection of the State Administration of Radio, Film and Television and obtained an operating license. Before April 14, 2015, this license was operated by "Guangdong Nanguang Film and Television Interactive Technology Co., Ltd.", a joint venture between Southern Media and Youpengpule; after the integration, Guangdong Radio and Television Station handed over the license to Southern New Media Company for operation.

China National Radio and Television also obtained an Internet TV license in March 2011 and handed it over to its subsidiary, Galaxy Internet TV Co., Ltd. for specific operation. Galaxy was established in July 2012 as a joint venture between China National Radio New Media Co., Ltd., Jiangsu TV, and iQiyi (under Baidu). In September last year, Dr. Peng Telecom Media Group increased its investment.

In July 2011, Hunan TV officially obtained the Internet TV license and entrusted "Happy Sunshine" to carry out its business. Before August 11, 2014, the shareholder of "Happy Sunshine" was Hunan Radio and Television; after that, it was changed to Mango Media Co., Ltd. (known as "Mango TV" in the industry). Since last year, rumors of Mango TV's listing have been rampant.

Competition Evolution from 1.0 to 3.0

Wu Chunyong believes that the development of the seven major licensees has gone from the 1.0 era (cooperation with color TV companies and set-top box companies, collecting license fees or service fees) to the 2.0 era (intervention of external capital), and is about to enter the 3.0 stage of competition. After the "strict management" of the State Administration of Press, Publication, Radio, Film and Television last year, the next step for licensees will be to focus on copyright and content operations after obtaining capital, and the gap is expected to widen in the future.

In the 1.0 era of China's Internet TV industry, the main model was simple commercial cooperation - the license holder collected a certain ID license fee or service fee from home appliance companies and OTT set-top box companies according to the number of corresponding terminals, and the corresponding home appliance companies and OTT set-top boxes could sell their terminal devices in the designated area. At this stage, online video companies were still in a relatively chaotic development state.

In the 2.0 era of China's Internet TV industry, outside capital actively intervened - online video companies, home appliance IT companies and other capital parties began to cooperate with the operating companies under the corresponding license holders at the capital level through joint ventures. In this way, they quickly entered the big screen of Internet TV.

To date, the three major Internet giants BAT have all become involved in Internet TV licensees. Alibaba (Jack Ma) has invested in Wasu, Tencent has invested in Future TV, and Baidu and iQiyi have invested in Galaxy. Most of the mainstream online video operators have found a "backer" in the license holder. Youku Tudou has found China Media Group and Guangdong TV, and LeTV joined hands with Future TV last year and changed to China Media Group and Guangdong TV this year.

Since June last year, the State Administration of Radio, Film and Television has vigorously rectified Internet TV, prohibiting the direct downloading of online video apps on TV. Wu Chunyong believes that after nearly a year of "rectification" and after capital has completed the layout of licensees, China's Internet TV industry will enter the 3.0 era, which was still in its infancy in 2015.

"As the cooperation between various licensees and capital parties continues to deepen, capital parties will definitely make efforts in the field of Internet TV and reshuffle the cards in the future, and the ranking of China's Internet TV industry will change. In addition, new business models (such as increased advertising, more paid content, new services, etc.) and new market opportunities will also emerge." Wu Chunyong said.

As of May 2015, the seven major licensees have basically formed a pattern of Future TV, Wasu, BesTV, Mango TV, Southern Media, China Media Group and Galaxy. Their content is different. For example, Future TV has a huge content resource of CCTV; Wasu has characteristics in carousel channels and TV games; BesTV integrates content resources of Disney and Hollywood and has an IPTV foundation; China Media Group is focusing on TV games, concerts and original programs.

A new round of reshuffle is brewing

The 3.0 era will allow China's Internet TV industry to resume its trot. According to incomplete statistics from Fusion Network, after several years of development, the total number of legal users of the entire industry is only 30 million to 40 million. Once it enters the trot stage, the total number of users will surely grow rapidly.

In the view of Li Yi, a veteran in the OTT industry, the strategies of the seven licensees in the next three years will be different. Some will draw on the Internet model, such as Galaxy, China Media Group, and Wasu, which "burn money and attract users"; others will "grasp revenue", such as BesTV, Mango TV, and Wasu.

In fact, Wasu Media and BesTV have both made "big moves". After Wasu Media received about 6.5 billion yuan in financing from Jack Ma and Shi Yuzhu, it will focus on two areas: one is the procurement and production of content; the other is to actively develop TV terminals across the country. The reporter of "China Business Daily" noticed that this year Wasu launched an activity of depositing 3,000 yuan and giving away high-definition TVs, and also encouraged users to download the Wasu video client.

After BesTV absorbed and merged "Oriental Pearl" last year, it will also make comprehensive efforts in the three major directions of content (film and television production, copyright management), omni-channel linkage (IPTV, Internet TV, cable TV, mobile phones, game consoles) and service applications (new media advertising and data marketing, game entertainment, TV shopping, cultural tourism) in the future.

Li Yi predicts that the sales volume of smart TV boxes in China will increase by 20% year-on-year to 28 million units in 2015, and the sales volume of smart TVs will reach 32 million units. It is estimated that by the end of 2015, the number of smart TVs and smart boxes in China will reach 144 million units, providing a foundation for the operation of Internet TV.

Wang Ruchen, head of Quark Media, believes that "the future competition focuses on integration and operation capabilities." The focus of integration is on upstream content resources. Operation capabilities are not only about selling advertisements and charging for on-demand services, but also about using big data analysis to accurately push content to users and the ability to aggregate content, such as classifying disaster films by theme and then disseminating them.

"In the 3.0 era, capital, operations, licenses, and content are integrated, and the integration of the Internet TV industry is deepening. Originally, the split between radio and television was too deep, and there was no substantial progress in the integration of the three networks. Now marketization is forcing the integration to accelerate." Wang Ruchen predicted that license holders are planning a new round of reshuffles, and there will be only two or three large license holders left in the future. "Even if some licenses are not cancelled in the future, they will have little value."

Shenzhen Radio and Television Group Chief Engineer Fu Fengchun reminded that there are seven major Internet TV licensees, but there are far more than that in actual operation, including LeTV, Xiaomi, Sohu Video, etc. "The advantage of Internet TV lies in Internet TV copyrights." In the past, TV stations paid a high price for Internet copyrights, 500,000 to 1 million yuan for one episode of a TV series; when Internet companies cooperated with licensees, they turned to the TV side, and the copyright of one episode of a TV series only cost tens of thousands of yuan. The free viewing model brought an impact to the satellite TV camp. "Domestic Internet TV must standardize copyrights and let users develop the habit of paying on demand, so that it can develop healthily."

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.