The SARFT's "Net Cleaning" upgrade has caused turmoil in the TV box market

The Network Department of the State Administration of Press, Publication, Radio, Film and Television recently issued a notice to Internet TV licensees, requiring them to immediately shut down the illegal video software download channels in Internet TV terminal products and shut down Internet boxes and video clients, which immediately made the wildly growing OTT set-top boxes and video websites' living room strategy "storm is coming". Experts believe that with the escalation of the "net cleaning" activities of the State Administration of Press, Publication, Radio, Film and Television, it will inevitably lead to market changes.

Cleaning up and rectifying will benefit licensees in the long run

The letter issued by the State Administration of Radio, Film and Television is mainly aimed at Wasu TV's Internet box "Tmall Magic Box" and BesTV's Internet box "Little Red Internet TV Set-top Box". The two boxes contain video apps such as iQiyi, Sohu Video, Youku , as well as video aggregation software and Internet browser software such as TVCat, Taijie Video, and Rabbit Video. There are a large number of foreign film and television dramas that have not been approved by the state, as well as micro-films, web dramas and other programs containing pornographic content, which provide technical support channels for entering televisions, seriously violating relevant policies.

The State Administration of Radio, Film and Television requires that Wasu and BesTV must immediately carry out rectification, shut down all download channels for various video APPs, video aggregation software, and Internet browser software in their Internet TV terminal products, and immediately carry out technical processing of the software that has already been downloaded.

Wasu Media later issued an official reply saying that the company has sorted out and rectified the existing problems, and restricted users from downloading third-party application stores by mandatory notification and terminal upgrades to ensure the content security of Internet TV. BesTV also later issued an announcement saying that after receiving the notice, the company immediately checked and technically processed the company's Internet TV terminals in accordance with the requirements of the notice.

The "closure letter" issued by the State Administration of Radio, Film and Television is the implementation and strengthening of the "Operation and Management Requirements for Internet TV Licensed Institutions" (known as Document No. 181 in the industry) issued by the State Administration of Radio, Film and Television in October 2011. According to the relevant provisions of "Document No. 181", the Internet TV terminal products selected by Internet TV integration institutions can only be connected to the Internet TV integration platform, and the terminal products are not allowed to have other channels to access the Internet, and are not allowed to connect to the relevant management systems and databases of network operators.

In response to the cleanup and rectification action of the State Administration of Radio, Film and Television, Shao Yiding, chairman of Youpengpule, said that rectifying the Internet TV industry is like the health supervision and management department checking the health licenses of catering companies. Only inspections can ensure that catering companies do not serve gutter oil and rotten fish and shrimp to users.

The industry generally believes that with this cleanup and rectification, license holders (BesTV, Wasu, etc.) will benefit the most and are expected to fully enjoy the time window brought by the policy dividends, and their dominant position and voice in the industrial chain will be significantly enhanced.

At present, there are a total of seven Internet TV license holders that have been officially approved in China, namely CCTV International, BesTV, Hangzhou Wasu, Southern Media, Hunan TV, China Radio International and China National Radio.

Wang Ningyuan, an IT industry researcher at CITIC Consulting, believes that licensees will continue to be important beneficiaries of this letter, and their bargaining power is expected to rise significantly in the future, and the chaos in the industry will be rectified. In particular, price competition and disorderly competition will be strictly suppressed, and the legitimate rights and interests and legal status of licensees will be better respected.

OTT box market faces reshuffle

Experts pointed out that in this cleanup and rectification, terminal manufacturers with their own content will be the beneficiaries, which will help them further increase user coverage and lay a good foundation for long-term user renewal. However, companies like Xiaomi that rely on third-party program content to attract users will be greatly impacted, and the lack of content in the short term will inevitably damage their user experience.

OTT boxes have developed rapidly in China in recent years. Zeng Huiming, CEO of China Broadcasting Network, once said that in 2013, 10 million OTT boxes of various types were sold in the Chinese market, and more than 80% of them did not meet the requirements of connecting with the broadcast control platform of the license holder. At the 7th Digital Marketing Conference of iResearch held in Shanghai recently, Hu Hao, general manager of the vertical search department of Baidu (186.81, 1.85, 1.00%), said that the real explosion of OTT boxes was in the first half of 2014, and the number of activations will develop to 20 to 30 million throughout the year.

In response to the SARFT's closure notice, LeTV officials said they would conscientiously implement the SARFT's policy, and that the sales of its box products might be affected. Xiaomi responded that it would not have a negative impact on the Xiaomi Box.

However, industry insiders believe that after this cleanup and rectification, for some OTT box manufacturers with a certain brand awareness, if they still want to sell and promote in the market in the future, they must cooperate with relevant licensed companies through authorization. This will undoubtedly increase the bargaining space of licensed manufacturers.

In the domestic OTT box market, the greater hidden danger lies in the proliferation of counterfeit boxes. Various counterfeit boxes do not need to spend huge amounts of money to purchase various copyrights and authorizations, and can even set up their own servers to provide Internet video content prohibited by Document No. 181.

Experts believe that the document issued by the State Administration of Radio, Film and Television this time is mainly aimed at the illegal behavior of the license holders, and the larger problem lies in those counterfeit boxes. This rectification of the illegal behavior of licensed manufacturers may pave the way for the subsequent rectification of unlicensed and marginal manufacturers.

The living room strategy of video websites may be affected

In addition, the SARFT's rectification is aimed at cracking down on illegal video clients and third-party application software that have not been reviewed by the broadcast control; cracking down on illegal and piracy phenomena means that users can no longer watch free content through aggregation software or video clients, which will inevitably reduce user experience in the short term and weaken its competitive advantage over IPTV and digital TV. Therefore, video client and third-party application manufacturers (iQiyi, Youku, Sohu Video, etc.) will inevitably suffer pain.

Wu Chunyong, editor-in-chief of Fusion Network and an expert in the integration of three networks, believes that the ban on pre-installing unapproved video software clients has temporarily delayed the entry of Internet video companies into living rooms, but the voice of Internet TV licensees will be strengthened, and the cable industry will also benefit from it on a small scale and for a short period of time.

In recent years, major domestic video websites have been competing fiercely in terms of multi-channel layout. As the PC video market becomes increasingly saturated, video websites have begun to increase their layout on mobile and TV terminals, and multi-screen integration is becoming an industry development trend. Among them, in terms of online TV, the "living room battle" among video websites is also intensifying. With the cleanup and rectification of the State Administration of Radio, Film and Television, Pang Yiming, a senior analyst at iResearch, believes that the strategy of video websites to enter the living room will undoubtedly be hindered in the process.

Youku Tudou (23.86, 0.67, 2.89%) Group recently told reporters that in the OTT business, the group has always adopted a broad cooperation approach, cooperating with the state's formal license holders, strictly abiding by national policies and regulations, and providing genuine and healthy content and superior user experience. iQiyi also responded that it will actively cooperate with relevant regulations, strictly review video terminal content, and actively communicate with hardware terminal manufacturers such as TV set-top boxes and content licensees to ensure that video content complies with policy regulations.

However, some experts believe that the entry of Internet companies into the living room market has strategic significance. Without crossing the red line, Internet companies will continue to actively penetrate the living room market.

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.