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The China Problem: Government-Sponsored Formats Are Incompatible
Ever heard of the Audio Video Standard (AVS)? What about China Blue High-Definition (CBHD)? China's homegrown standards keep Western companies at bay.

Last month, I covered the topic of a potentially formidable Amazon competitor, Alibaba Group, rising in China to challenge Amazon’s ecommerce dominance and its cloud-based services, including streaming services.

This month, let’s look at another angle: the pitfalls of competing in Alibaba’s home market. China is a market fraught with peril, from incompatible video formats to a highly regulated web presence.

Let’s look at the bigger picture first: How well can a company that stakes its success on allowing users to communicate fare in China? In some cases, the biggest websites cannot. A quick look at Wikipedia shows that, as of late 2015, almost 3,000 Western-owned websites were blocked in mainland China.

The specific sites that are blocked (but are still allowed in Hong Kong and Macau) are not allowed based on the country’s policy of internet censorship. According to GreatFire.org, which works to bring transparency to Chinese web surfing policies, companies such as Google and its video-centric subsidiary YouTube have been blocked for years.

YouTube in particular has been blocked from mainland China access since March 2009. Facebook has been blocked since July 2008. Instagram was blocked more recently, in September 2014.

For its part, GreatFire.org is working on a stable virtual private network (VPN) that users within China can use to view content not officially allowed by Chinese web censors. VPNs have existed for years, but often only on a small scale, and seldom as part of a concerted effort to allow enough of China’s almost 1.4 billion citizens to view any content on the web.

Along with firewalls and blocked websites come the issues of underlying technologies. The thinking in China appears to be one of replacing industry-standard technologies—which could be used to view content on blocked sites like Facebook or YouTube—with homegrown technologies that serve the domestic market.

While the West is focused on Google’s efforts to push VP9 as an open-source, royalty-free replacement for H.264, the Chinese market has been pushing the Audio Video Standard (AVS) as its own way to replace H.264 and the AAC audio codec.

According to the AVS webpage, almost 90 percent of the AVS patent pool is owned by Chinese companies. Never heard of AVS? You’re not alone, as it hasn’t received the same traction outside China as other royalty-free offerings.

One reason is that the AVS group, tasked by the Ministry of Industry and Information Technology of the People’s Republic of China to come up with an alternative to MPEG-2 and H.264, uses Chinese as its working language. This means that documentation is first created in Chinese and only later translated to other languages. Specs for the most recent version, AVS 16, are available in English.

Even the disc-based, high-definition formats aren’t available outside of China. Despite its name, China Blue High-Definition (CBHD) isn’t a modified Blu-ray format. CBHD, alternatively known as China High Definition DVD, was announced in 2007 and derived from the HD-DVD (red laser) standard that was abandoned in the West when Blu-ray won the format war in 2008.

But despite web censorship and replacement video technologies, Chinese investment in premium content is at its highest-ever levels. In early October, Alibaba pushed forward with a plan that Bloomberg heralds as a way to “bring Hollywood to China” by buying up portions of North American media companies.

“Alibaba Pictures Group Ltd. is buying a stake in Amblin Partners, the production outfit backed by Steven Spielberg to work together on production, marketing and distribution both globally and in China,” Bloomberg News writes, noting that Jack Ma’s investment in Spielberg’s storied media firm is “the latest in a spree of deals over the past two years intended to help U.S. studios tap what could soon be the world’s largest box office. ...”

In other words, content is king, even if the technology to view the content in the domestic Chinese market can be described kindly as the knave.

[This article appears in the November/December 2016 issue of Streaming Media magazine as "Looking East, Part 2."]

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