China video sites may mean dollars for Hollywood

New content deals should help film and television producers get revenue from viewers in China

Bootleg copies of films and television shows have long been the bane of Hollywood studios trying to make a buck in China, where piracy is rampant. But video hosting sites in the country might be paving a way for these U.S. companies to start earning more revenue on their products by bringing their films and TV shows legally to China.

Last week, the operator of one of China's largest video hosting sites Ku6 Media announced that it had signed a content deal with two major American studios. Both Sony Pictures Television and Warner Bros. will provide the broadcasting rights for several hundred films and TV episodes. This makes Ku6, "the first Chinese local video portal to acquire legitimate copyright content from major Hollywood studios," according to the Chinese company.

Ku6 has yet to say what films and shows the deal will allow. But users can expect the first Hollywood content to arrive starting next month, said company spokesman Matthew Zhao.

Youku, China's largest video hosting site with 30 million unique visitors a day, is also working on content deals with major film studios in the U.S. "The talks have mainly been smooth," said Ding Heng, the director of media partnerships for Youku. "But the talks have gone on for over the last two years."

The key issues have been how Youku will show and pay for the content the studios provide, he added without going in to details. "We feel like we will be able to satisfy these conditions," he said.

Such content deals could be a reversal for China's video sharing sites, which have been accused of hosting pirated American films and TV shows. Sites like Youku and Ku6 have worked to fight the illegal copies by deleting the videos when found. Ku6's CEO, however, has acknowledgedthat Chinese users have had to rely on piracy to view foreign movies and TV shows.

Now by trying to partner up with the content producers, the video hosting sites are not only expanding their offerings, but also hoping to generate more revenue. Both Youku and Ku6 have yet to become profitable, and face high costs in hosting so many videos.

"The video-sharing sites in China have been acting very differently from Youtube in the U.S. They haven't had so much user generated content" said Duncan Clark, chairman at Beijing-based technology consultancy BDA. "They do have tremendous reach. But the challenge is the business model"

This could lead to the emergence of more subscription services, or small fees to view the latest Hollywood films or American TV shows. And for the film studios involved, they may have nothing to lose, considering the extent to which they suffer from piracy in China, Clark said. At the same time, the content deals may help the studios better promote their films in the country.

Currently, China limits the number of foreign films shown in the country's theaters to 20 each year. Officially uploading the films to the web could provide a way for the movie studios to work around this regulation. But it remains to be seen how these content deals will be regulated and what role China's censorship will play.

"You can't stop piracy," Clark said. "For the studios, It's more about converting this from a headache to a revenue stream."

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