5 FEB 2021

CHINA’S SVODS DOMINATE LOCALLY, BUT GLOBAL GROWTH SEEMS UNLIKELY

China is the world’s second largest national spender on video content, reaching a record total spend of $14.6 billion in 2019. However, this is now largely driven by local SVOD services rather than traditional broadcasters, according to Ampere Analysis.

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China is the world’s second largest national spender on video content behind the United States, reaching a record total spend of ¥100.8 billion ($14.6 billion) in 2019. However, this is now largely driven by local SVOD services rather than traditional broadcasters, according to Ampere Analysis.

The largest players in this market - SVOD services iQIYI, Youku-Tudou and Tencent Video - are known collectively as BAT, on account of their backing by internet technology companies Baidu, Alibaba and Tencent, respectively.

Investment in content by the BATs services has increased from ¥18.3 billion ($2.8 billion) in 2016 to ¥59.6bn ($9.2 billion) in 2020 - an average growth rate of 34% each year. The largest share of this has gone towards acquired TV and film, accounting for over 70% of 2020’s content expenditure across all services.

Meanwhile, each platform has also invested in original programming, with all services increasing spend on productions by over 300% in the five years since 2016, as audiences turn away from traditional broadcasting in favour of the exclusive local originals and content catalogues available on SVOD platforms. The growth is such that spend on platform originals by the three BATs is forecast to overtake content spend of all kinds by the top six traditional broadcasters combined by 2025.

Attractive as the content on these services is to local audiences, international growth may prove challenging due to the presence of global players and the BATs’ largely Chinese catalogue. The combined revenue of all three BATs services was less than either Amazon Prime Video and Netflix, which have a clear advantage globally as established brands.

The BATs services will also face difficulties from their reliance on locally produced TV shows and films, with almost 70% of consumers in the United States (currently the highest value subscription OTT market) reporting in Q3 2020 that they rarely or never watch foreign TV series, making a largely Chinese catalogue a hard sell.