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Over-the-top Chinese entertainment
By Yao Minji

JERRY Lin, 37 years old, sells about 100 Blu-ray discs every day from his Taobao online shop and another 30-50 from a physical shop on Huaihai Road. In 2004, when he had just opened the bricks-and-motor shop, he sold more than 300 DVDs a day, mostly pirated. Each cost from 10 yuan (US$1.60) to 15 yuan.

“When it was Oscar season or the end of hot TV dramas, the sales could go beyond 500 or 600 yuan a copy,” Lin tells Shanghai Daily. Another major business was renting of TV drama DVDs, but he stopped in 2008.

“Back then, I didn’t really need a brain to make money,” he says.

Lin is reluctant to reveal his profit per disc, but at the peak of the business, Lin was able to buy a half-million-yuan BMW with earnings from his DVD shop. Today, some of his suppliers have long gone on to other more profitable and sustainable businesses, and he is barely making ends meet.

“It’s ironic that these online video websites are able to achieve what the cops failed to do — crushing the pirate DVD industry here,” says Lin, who ought to know.

Lin’s DVD business is hardly the only industry affected by increasing broadband speed, which allows users to watch high-definition videos, listen to music and play games on the Internet.

Now his customers are mainly foreigners, such as American tourist Miranda Thorenberg.

“All my Chinese friends told me I can easily watch all these movies or TV dramas online, but I don’t really read Chinese and I can’t handle the sites,” she says. “DVDs are still my primary source.”

But the handful of customers like Thorenberg can’t save the entire industry, and other industries are hurt by the Internet streaming.

In 2013, advertising revenue for China’s traditional broadcasting industry was only up by 2.52 percent year on year, very little compared with its 13 percent increase in 2012; that was largely due to the big increase in ads on Internet video providers.

“It only makes sense for me to pay a few thousand kuai (bucks) to get an ad on those sites showing Korean or Japanese TV dramas targeting the same audience group my clothing shop sells to, women between 25 and 40,” says Charlotte Liu, owner of a Taobao shop.

The latest development is OTT, or over-the-top content, referring to delivery of video, audio and other media through the Internet via OTT TV and OTT set-top boxes, such as Apple TV.

In China, the most popular equivalent is the set-top box by video provider LeTV or smart TV provided by Xiaomi, famous for its inexpensive smart phone targeting young people.

“I haven’t really bought a DVD in my whole life,” says 18-year-old Lydia Chen. “My dad probably bought kid’s DVDs for me when I was little, but since middle school, I’ve been watching movies and dramas online.” She asks what’s the point of buying full-set DVDs much later, since she can watch them online at around the same time they are released abroad.

“I feel like a world citizen, connected to the rest of the globe,” she adds.

Chen’s most recent collection on internet video sites is the hit American drama “House of Cards,” released on Chinese sites with subtitles within hours after Netflix launched the second season in February.

Many Chinese Internet video providers such as Sohu, LeTV and Youku have been buying broadcasting rights for popular dramas from the US, Britain and South Korea, to name a few.

She mainly watches on her iPad, while her laptop, like many on the market, is thinner and lighter without a DVD player. Her parents still keep a DVD player to watch some old home videos they burned on DVD.

“I plan to extract the contents from those DVDs, so we soon won’t be needing that player anymore,” Chen says. “Soon, I will throw out all the fixed remote controls for the DVD player, CD player and sound system at home. I’ll only need one remote.”

Chen got an OTT set-top box last year as Christmas gift, and she has been watching her favorite Korean variety shows and TV dramas on the 52-inch TV at home by wiring the box.

By yesterday at noon, 7,000 Xiaomi smart TVs (47 inches), priced at 2,999 yuan, were gone in 30 minutes, according to the hardware maker’s official Weibo platform.

Last April, 50,000 LeTV boxes, priced at 290 yuan, were sold out in less than an hour through its Weibo site.

“The market share of OTT TV boxes is still relatively low at the moment, but it will become the mainstream and it has great potential,” according to Zhang Junxia, director of Guideline Research, a specialist in China’s digital market.

He made the remarks last October when he released the firm’s report on China’s set-top box market in 2013.

The report shows that the ownership of all set-top boxes (including cable, IPTV and OTT TV) exceeds 260 million, making the popularization rate more than half. It also shows more than 45 million new users, a 20 percent increase from 2012.

Among the many users, around 70 percent own cable TV boxes, which the market share of OTT TV boxes increased sharply from 4.7 percent  to 15.1 percent from 2012. Sales volume between January and September 2013 increased by nearly 90 percent.

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