After the box was “banned”, the living room fell into the hands of the license holder

Since the official listing of China Radio and Television Network Corporation at the end of May , the Internet TV box market has encountered a series of attacks from the State Administration of Radio, Film and Television in less than two months: it issued a closure letter, criticized integrated business licensees such as Wasu and BesTV by name, and demanded the closure of Internet TV box video clients; forced the radio and television boxes to install the self-developed TV OS 1.0 operating system; and Internet TV boxes must stop providing time-shifting and playback functions for TV programs.

As the State Administration of Radio, Film and Television gradually deepens its supervision of the Internet TV industry, a new round of competition between policies and the market has begun. Video companies, traditional radio and television companies, licensees, hardware manufacturers, other content providers... Who are the real beneficiaries and victims of the major players in the industry chain? The "living room strategy" of video websites has been blocked. What changes will the business model face? What direction will the market go in the future?

Policy supervision is the "strictest in history"

Regarding the current Internet TV market, Cai Fuchao, director of the State Administration of Press, Publication, Radio, Film and Television, and Tian Jin, deputy director, specifically instructed that Internet TV must first manage the seven major licensees. Currently, the seven licensees have violated regulations to varying degrees. If any of them fails to follow the requirements of the administration, their licenses will be revoked, and if they do not set a good example, they will be dealt with. If all seven violate the regulations, the Internet TV business will be suspended.

It was revealed that the State Administration of Radio, Film and Television mainly criticized six aspects, including irregular cooperation between licensees and commercial websites, out-of-control EPG management, failure to report and approve the issuance of terminal products, illegal cooperation with telecom operators, chaotic sales channels, and cooperation with Internet companies that seriously violated regulations.

Regarding the issue of "unregulated cooperation with commercial websites", the SARFT pointed out that "commercial websites cooperating with licensees in the form of program service platforms is a cooperation model that the SARFT firmly prohibits". In the future, video websites will not be able to have a special entrance on the box, nor will they be able to set up special areas and brand displays for video websites. This also means that the current way of "entering the living room" by Internet companies will not be recognized, and the business model that has just been formed will no longer be valid.

During the meeting, the SARFT stressed the control of content, and resolutely investigated the phenomenon of a large number of foreign TV series, micro-films, and online dramas that did not obtain broadcasting qualifications entering the TV. All major licensed broadcasters were removed from the air within a week. More severely, the SARFT required licensees not to cooperate with companies that the SARFT was investigating.

LeTV suffered a big blow in the game with the State Administration of Radio, Film and Television. Its market value evaporated by nearly 6.4 billion in two trading days, and it was eventually forced to suspend trading. Industry insiders generally believe that many actions taken by the State Administration of Radio, Film and Television this year are not new policies, but the continuation and upgrade of the "Operation and Management Requirements for Institutions Holding Internet TV Licenses" (hereinafter referred to as "Document No. 181") issued in 2011. In fact, since the end of last year, the industry has begun to discuss the implementation of Document No. 181.

Wu Chunyong, editor-in-chief of Fusion Network, believes that the series of attacks by radio and television this year are also natural. "When OTT boxes were not too rampant, there was no good development model and the supervision was a little loose. The situation is different now."

Since 2013, "Internet TV box" has gone from a technical term to a popular term, and the sales channels of OTT boxes have become wider, and the development trend is unstoppable. With the continuous strengthening of supervision, the status and interests of various entities in the industry chain are facing readjustment.

Living room falls into the hands of the license holder

Industry insiders pointed out that video websites can now only become simple content service providers, and the previously established business model of paid video services and interstitial advertising will also be rewritten.

After a round of supervision, business licensees and content licensees have undoubtedly become the biggest beneficiaries. Although they were criticized by name on the surface, the licensees' right to speak has been maintained and strengthened, and the "illegal" content on the integrated broadcast control platform has been removed, but the licensees' own content has been highlighted.

It is understood that the State Administration of Radio, Film and Television has issued 7 Internet TV integrated business licenses and 14 content service licenses. The 7 Internet TV integrated service agencies are CCTV International, BesTV, Hangzhou Wasu, Southern Media, Hunan Television, China Radio International, and China National Radio.

Wasu said in response to an interview with a Nandu reporter that the impact of current regulation is difficult to assess. However, it is not difficult to see from Wasu's recent strategy that its expansion pace is accelerating while video websites are suffering. In mid-July, Wasu Media announced that it plans to invest 250 million yuan in Shanghai Yinrun Media Advertising Co., Ltd. to develop upstream content industries.

Insiders revealed that Wasu will invest in multiple content production companies in the future to enrich the company's program resources. Public information shows that in May this year, Wasu has invested 100 million yuan to increase the capital of Tangren Film and Television. Previously, 1.515 billion yuan of the funds raised by Wasu's private placement will also be used to invest in the media content center.

In addition to Wasu, BesTV is also accelerating its layout in the living room field. Recently, BesTV has reached a copyright cooperation agreement with Fox in the field of TV series. So far, BesTV has introduced copyrights from all six major Hollywood film companies (Sony , Universal, Warner Bros., Disney, Paramount, and Fox).

It is reported that the "new generation of home entertainment center" terminal equipment Xbox One jointly created by BesTV and Microsoft has been pre-approved by the competent industry department and will be launched in September this year. At the "10th China International Comic and Game Expo (CCG)" held not long ago, BesTV announced that it had joined hands with 12 domestic brand game suppliers such as Perfect World, Giant Network, and 9you to establish the first "Home Game Industry Alliance" in China.

Nandu reporters learned that among the seven licensees, Wasu and BesTV are two of the most market-oriented ones, and their transformation also largely represents the development direction of conservative traditional radio and television.

In early July, Luo Jianhui, director of the Network Audiovisual Program Management Department of the State Administration of Radio, Film and Television, reiterated that integrated service licenses will no longer be issued. This also means that both content providers and hardware manufacturers will become increasingly dependent on the existing seven licensees.

Industry insiders believe that licensees must be provided with program content and exercise broadcast control rights by radio and television enterprises, and radio and television enterprises are affiliated with the State Administration of Radio, Film and Television. The State Administration of Radio, Film and Television will take the interests of licensees into consideration when making decisions, and they will not become victims under any circumstances.

Lost OTT Box

After the rectification, in order to maintain their appeal to users, box hardware manufacturers such as Alibaba and Xiaomi need to invest huge amounts of money to build their own content resource libraries through license holders. But in Wu Chunyong's view, the biggest "injury" this time is not the OTT box that everyone thinks.

"Companies that make boxes, including knockoff boxes, have made money 'illegally' over the past three or four years, and have been rewarded with profits at all levels. This is because each piece of hardware sold is worth a piece of hardware, but content providers are different. They spent a lot of time and effort to build a good layout and gain a certain market share, but suddenly their products were taken off the shelves, and all their users were lost overnight."

Bao Ran, an industry expert and CEO of Yimuwei Culture Communication, believes that the developers of third-party peripherals or applications are the ones who suffer the most among content providers. "Because they rely on others and cannot exist independently. Now there are only small creative companies. For example, if they want to make a game, the technical cost and negotiation difficulty have become higher. Now that the policy is tightened, they cannot survive, but large video websites still have other channels."

Some people believe that TV boxes are not limited to video functions. For regular TV box manufacturers, under the strict control of radio and television policies, video is by no means the only way to go. Transforming into other applications such as smart home control centers and games is also a good choice.

There are quite a few game product boxes on the market, but the reporter found in the interview that for OTT boxes, the user experience of TV terminals is a potential problem.

"I have used so many TV boxes, including knock-off ones, which are all similar and basically poorly made. There is no application on the TV that I can't live without. For example, how to use the remote control to enter the username and password on the TV screen, even this problem is not solved by many TV boxes." A TV box user told Nandu reporters that he believes that the interface of the box is not just about art design and layout, but more importantly, the interactive experience.

In the OTT box market, users' demand for applications is far lower than their demand for content, which can be partly attributed to the fact that the supporting facilities at the TV level are not as mature as those of mobile phones and pads. Take the camera as an example. Currently, all OTT boxes on the market are Android systems. It is difficult to find cameras that are compatible with Windows and Android systems. This also means that the camera plugged into the PC cannot be used on the TV side, which greatly affects the user experience.

"The third-party application market is not just about doing your job well. You also need to stand at the user's level and think about the user's device needs. Only by solving these problems can you quickly occupy the terminal market of televisions," said Wu Chunyong.

Chen Wu, general manager of Mango HiQ, said that the box will inevitably develop into life services and other fields in the future. After that, the box should change from video to games, music, and reading; it will expand from entertainment to information acquisition, children's education, family activities, community social interaction, life services, e-commerce, family financial management and other directions.

The birth of a new model: Doing a good job in CP is a better choice

After a meeting with the State Administration of Radio, Film and Television, Mango TV immediately responded that it would remove non-content license video software and aggregation software before July 19, and open the cooperation platform to institutions with content service licenses.

It is worth noting that Mango TV pointed out, "In order to enrich the content of Internet TV services, we will vigorously expand cooperation with other Internet TV content service licensees in the near future and introduce their applications into cooperative models." Mango TV's position also represents other integrated broadcast control platforms to a certain extent.

An analyst previously told Nandu reporters that from the perspective of the entire industry, Internet TV licensees will have more say in content, the role of video websites will be weakened, the previous advertising profit model cannot be sustained, and new model innovation must be sought. Cooperation with radio and television companies seems to be the only way forward.

The current 14 content service licenses include seven pure content service licensees in addition to seven integrated licensing agencies, namely the Film Satellite Channel Program Production Center, City United Television C U T V, Beijing TV, Yunnan TV, Shandong TV, Hubei TV and Jiangsu TV. The State Administration of Radio, Film and Television encourages local radio and television to apply for content licenses.

Recently, LeTV, which is at the center of controversy, announced that it will work with Chongqing Radio and Television Group to jointly apply to the State Administration of Radio, Film and Television for an Internet TV license.

It is understood that LeTV has signed a "Strategic Cooperation Agreement" with Chongqing Radio and Television and Chongqing Cable Television Network Co., Ltd. The cooperation will focus on Internet TV and TV series business. LeTV will take the lead in operation, while Chongqing Radio and Television will mobilize various resources and strive to apply to the State Administration of Radio, Film and Television for an Internet TV integrated broadcast control service license or an Internet TV content service license as soon as possible.

Although the future of the cooperation between the two parties is still uncertain, this move has undoubtedly helped LeEco, which was previously in deep crisis, regain investor confidence. LeEco executives said at a previous investor briefing that the policy will not change the company's current four-layer architecture of "platform + content + terminal + application".

The old business model was suddenly interrupted and new rules of the game are taking shape.

Guo Fanli, research director of CITIC Consulting, pointed out that video websites actually have the core competitiveness of Internet TV, such as content, network, user experience, operation, market, etc., which are not comparable to state-owned enterprise licensees. Cooperation with video websites is necessary to improve the competitiveness of licensees. Cooperation between the Internet and radio and television groups will become a general trend.

Wu Chunyong believes that for latecomers like LeTV, applying for a content license and becoming a good CP (content provider) is a better choice than applying for an Internet TV integrated business license.

"LeTV has channels for movies, sports, TV series, education, etc. It originally wanted to do commercial things on its own, but this is against the rules. If it can obtain a license together with Chongqing Radio and Television, LeTV can use its legal identity to negotiate with licensees such as Wasu and BesTV based on the original high-quality channel content. Whether it is user payment or interstitial advertising, and how the specific profit sharing is, this business model will gradually take shape."

In the future, companies' business models on the Internet and mobile Internet may be replicated on Internet TV.

Wu Chunyong told the Southern Metropolis Daily that if a partnership like the one between LeTV and Chongqing Radio and Television is successful and can help radio and television and cable TV operators find a new business model, it will become an industry trend and a direction of change; but if this model cannot be promoted and only helps LeTV solve some problems from the perspective of the capital market, while cable TV operators do not benefit, it will be difficult to continue.

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The SARFT’s “serial punch”

First punch: "Shutdown letter" requires the closure of the Internet Box Video Client

According to the regulations, client software that carries commercial audio-visual programs such as iQiyi, Sohu Video, and Youku, as well as video aggregation software and Internet browser software including TVCat and Taijie Video, must be removed from the shelves. This has a great impact on content providers such as video websites and third-party applications. Although licensees such as Wasu and BesTV were named, after the "closure letter", the seven licensees strengthened their control and review rights over content, and the advantages of license resources will be further exerted.

The second punch: Forcing broadcasting and television boxes to install TVOS 1.0

Currently, it is mainly aimed at TV boxes, and has not yet been extended to Internet TV boxes. After installing the TV OS 1.0 operating system, on the one hand, the State Administration of Radio, Film and Television can effectively control the content of the box; on the other hand, there will be a supporting advertising system in the future, and the scope will eventually be extended from TV boxes to OTT boxes. However, industry insiders believe that the cost of promotion is not small.

The third punch: The box must stop providing TV program time-shifting and playback functions

This rectification is mainly aimed at Internet boxes, and does not involve digital high-definition interactive set-top boxes owned by cable TV operators. Previously, OT boxes such as Tmall Magic Box and Mango HiQ, which had pre-installed live broadcast functions, have disabled this function of TV channels, and users can no longer perform time shifting and replay. Industry insiders believe that this move will affect the experience of box users.

Fourth Punch: Video websites cannot have a dedicated entrance on the box

Video websites are also not allowed to set up video website special areas and brand expressions; previously, video websites developed box businesses mainly in two forms: one is to set up video special areas or entrances in the box, and the other is to cooperate with the license holder to provide content for the box. But once this punch is thrown, the first form will no longer exist. When users watch TV through the box, they cannot see the brand expression of the video website. With the example of the cooperation between LeTV and Chongqing Radio and Television, latecomers may choose to apply for content licenses through local radio and television in the future, and "video companies + traditional radio and television" will become a trend.

The Fifth Fist: Order No. 292? (To be determined)

At the beginning of this year, there was news that the State Administration of Radio, Film and Television was accelerating the release of policy No. 292, which is expected to be promulgated before the end of this year. This is a supplement to the previous Document 181 on Internet TV.

First, we will increase anti-monopoly efforts on the Internet and strengthen supervision of the monopolistic behaviors of Internet giants such as Tencent, Baidu, Alibaba, and 360. In some Internet information service fields, we must protect the interests of small and medium-sized enterprises and prevent oligopoly. Second, we will improve content supervision, crack down on piracy, and strengthen law enforcement against pirated products and companies that do not meet content supervision requirements or whose content has not been reviewed by the content broadcasting licensee.

It is revealed that about 80% of the current OTT box market is counterfeit. The new policy will severely crack down on counterfeit boxes and online content piracy platforms, which will help increase the market share and competitiveness of content licensees or content information providers that cooperate with licensees.

Circular No. 181

(Full name: "Operation and Management Requirements for Institutions Holding Internet TV Licenses") The management requirements for terminal products such as Internet TV set-top boxes include the following three points:

●The Internet TV terminal products selected by the Internet TV integration agency for cooperation can only be connected to the Internet TV integration platform. The terminal products shall not have other channels to access the Internet and shall not be connected to the relevant management systems and databases of the network operating companies.

●The Internet TV terminal products selected by the integration agency for cooperation can only be embedded with the address of an Internet TV integration platform. The terminal products and the platform are completely bound together, and the integration platform has unique control and management over the terminal products.

●After the integration agency selects the type, manufacturer, and model of the terminal product to be cooperated, it submits the client number application to the State Administration of Radio, Film, and Television. The State Administration of Radio, Film, and Television will issue the corresponding number segments for qualified terminal products in accordance with the current Internet TV client numbering rules such as unified allocation, batch authorization, and one machine one number, and allow the production of terminal products within the number segment. The authorized integration agency is responsible for determining the number of each Internet TV client according to the unique principle.

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.