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The Chinese Streaming Market Rife With Possibilities and Pitfalls

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Last week, a who’s who of the streaming media industry gathered on the shores of the Pacific Ocean to breathe in the salt-laced air, catch up with colleagues, and hear presentations spanning the gamut from how-tos to how-not-tos.

During one of the sunset, after-hours events at Streaming Media West at the Huntington Beach Hyatt Regency—while the streaming industrialists are enjoying cold beverages, good conversations, and an awesome band—it would have benefited the industry as a whole to collectively cast our gaze as far west as possible across the ocean waves.

The other side of the Pacific is ringed with countries such as Australia, Japan, Taiwan, and China. This, the collective Asia-Pacific market (APAC), is a market rife with potential and pitfalls for streaming, full of growth opportunities and tricky licensing bridges to navigate.

One of the latest pitfalls, which only recently came to my attention in the form of a data point on an enterprise video platform (EVP) white paper I was commissioned to create, is the need for online video providers to obtain an Internet Content Publishing (ICP) license in China.

It turns out that, regardless of how popular your content might be in China, it will most likely suffer significant delays and lower quality if it is streamed from a content delivery network (CDN) outside the Great Firewall of China. In fact, some of the content itself may not even traverse the firewall.

This leads to the natural technical conclusion: Host Chinese-facing videos within the Great Firewall of China, or at least cache the content somewhere in mainland China. But this delivery conundrum, it turns out, is more political than technical in nature.

Companies that want to host on-demand content in China need to either host it with an ICP-compliant company or obtain their own ICP licenses. Even those multinationals that use an EVP for subsidiaries or key Chinese partners—which may be linked to the corporation’s headquarters country in Europe or North America via a virtual private network (VPN)—need to obtain an ICP for content that will likely never be available for public consumption.

Recent statements by Chinese government agencies are adding an additional wrinkle, even for those websites and applications that emphasize live- and social-media-focused video delivery.

Chinese government agency SAPPRFT (short for the State Administration of Press, Publication, Radio, Film and Television) halted live streaming on several Chinese websites in late June 2017, including the ever-popular Weibo, which is a NASDAQ-listed company (ticker symbol WB) owned by a Chinese government entity called Sina (ticker symbol SINA).

The initial announcement sent SINA down almost $20 a share, or around 20 percent, in the days following the SAPPRFT crackdown on Weibo. The stock has since recovered to pre-June levels, and Weibo itself seems to have weathered the storm by quickly issuing a few key changes to its live-streaming and video-sharing features, with its stock rising in the past 2 months more than 25 percent.

According to Marbridge Daily, two parts from the new Weibo terms of service highlight the changes:

First, “With the exception of accounts operated by media and government entities, account holders who do not have a type-1 audio-visual license may not upload political and current affairs news programming.”

Second, even those with a license weren’t allowed to continue posting until verified, as Weibo stated: “... account holders who have a license must provide proof of licensing to Weibo, so that Weibo may verify their credentials.”

What’s interesting about this move by the SAPPRFT is the fact that Weibo hosted its content on two approved and licensed service providers: Miaopai and Yizhibo.

Karen Chan, an analyst for Jeffries, made the case for Weibo to weather the storm unharmed. Her response was fairly quickly picked up by Barron’s less than 24 hours after the initial statement by SAPPRFT.

According to Chan, all of the video served and streamed on Weibo “is hosted exclusively through Miaopai and Yizhibo respectively, both of which are owned by Yixia Technology, a parent company with the required license.”

Yet, less than 2 days later, Weibo had already changed its terms of service, including this potentially discourse-killing new rule: “Weibo will no longer accept uploads of videos over 15 minutes in length.”

The one other company noted in the Barron’s article was Momo, a service that offers paid live-streaming accounts. Its stock also weathered the SAPPRFT storm, but at the time of this writing in late August it had seen a drop-off in value of almost 20 percent, despite revenues surging over 200 percent compared to last year.

The reason for the drop in share price? Lack of investor confidence in Momo’s ability to grow the number of paying users for its live-streaming services. According to analysis of Momo’s services, the number of new paying users is “more or less flat” compared to the previous quarter.

Might it be possible that the SAPPRFT statements requiring licenses for anyone live-streaming content in China could have significantly chilled—or at least significantly delayed —market growth for live streaming there?

That’s a question to ponder for those of us on this side of the Pacific.

[This article appears in the October 2017 issue of Streaming Media Magazine as "Gazing West to the East."]

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