The Chinese online video market, including revenue from advertising and content purchases, is forecast to more than quadruple from 22 billion Chinese yuan ($3.5 billion) in 2015 to 96.2 billion yuan ($17.6 billion) in 2020. With the rapid adoption of smartphones, and growing penetration of broadband internet, Chinese consumers are gradually switching from TV to online for video content. This transition will lead to growth in a host of online-video services, according to IHS Markit (Nasdaq: INFO), a world leader in critical information, analytics and solutions.
“The online video market boom in China is caused by an increase in consumerism and the country’s growing of the middle class,” said Qingzhen Chen, advertising analyst for IHS Markit. “Advertisers are already expanding their digital ad budgets, which is largely responsible for the overall growth in online video revenue in China.”
Online video advertising revenue accounted for more than 95 percent of the Chinese online video market in 2015. However, subscription services are growing fast, thanks to a surge in the amount of available original content and aggressive discounting of membership fees. In 2015, online video revenue from purchases and subscriptions grew more than 200 percent compared to the prior year, reaching 2.6 billion yuan ($423 million). The number is expected to top 16 billion yuan ($2.6 billion) by 2020.
According to the IHS Markit Advertising Intelligence Service and Broadband Media Intelligence Service, while both TV broadcasters and foreign online video service providers play a key role in producing content for online consumption in China, unlike most mature markets, online video platforms are dominated by Chinese online-first companies. Examples include Youku Tudou, iQiyi, Leshi, Tencent Video and Sohu Video. They not only create content and produce devices to sell their subscriptions, but also own social media platforms, through which they promote their content. Tencent’s WeChat Wallet, Alibaba’s Alipay and other payment systems also make the subscriptions and transaction easier. In contrast, well-known foreign players, such as YouTube and Netflix, are absent from the Chinese online video landscape, due to government regulations.
