Video Makers On Cusp of Renaissance 视频制作商或迎来美好时代

By newsdoug on November 30, 2011

Internet demand fuels programming renaissance I’ll take a break now from all the Internet turmoil to take a look at an area that’s showing much more promise these days, namely the sector that makes video content for TV stations and increasingly Internet video sites. In fact, I’ve already talked about the big potential for this space on several occasions, following landmark licensing agreements this year between some of the major Hollywood studios and leading video sites operated by Youku (NYSE: YOKU), Tudou (Nasaq: TUDO) and Sohu.com (Nasdaq: SOHU). (previous post) But now the China Daily has published an article showing just how well the video production industry is doing, with prices for TV shows and movies soaring in the last 5 years. (English article) According to the article, individual episodes for popular TV shows can now fetch up to 1 million yuan each, or about $150,000, compared with just several thousand yuan per episode just 5 years ago. The article cites a recent instance that shows how hot the market has become, with Sohu recently paying 30 million yuan for nearly 100 episodes of the hit TV series “New Princess Pearl”, or about 300,000 yuan per episode. As a veteran reporter on the China media scene, I remember the old days when TV show and movie makers complained that it was impossible to earn any money in the Chinese market, where individual media giants held monopolies in all major cities and thus could demand ridiculously low prices from programmers because they had no competitors. What a difference 5 years makes. Of course, for the investor the big issue is that most of the programmers aren’t publicly traded, though a handful like Huayi Brothers (Shenzhen: 300027) are well positioned to capitalize on the boom. I expect we’ll see a lot more of these companies go public in the near future as business soars. But that said, the popular saying “what goes up must come down” is probably true here also. Put simply, this spending frenzy by the video companies is probably unsustainable over the longer term, simply because there aren’t enough advertising dollars to support such rapid growth and it will also take time for Chinese consumers to gradually get used to the idea of paying for such online content.

Bottom line: Booming demand for video content is likely to spark a renaissance for movie and TV program makers, though a correction for the sector is also likely in the next 2-3 years.

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