Most westerners probably have no idea what QVOD is, and they shouldn’t be blamed; after all, most countries are not the Wild West for copyright protection like China. Even in America, where peer-to-peer sharing was invented, the relatively stringent copyright laws and its persecution and guaranteed the activity to be sidelined to the fringe.
In China, however, there is the tradition of companies competing to provide illegal contents more efficiently and profiting from it, QVOD is merely the latest beneficiary. According to a recently published article detailing the rise of QVOD, QVOD essentially allows websites to stream movies more efficiently at a lower cost, then taking a cut from their advertising revenues.
It is estimated there are a hundred thousand websites that provide this service, most of them relying on guaranteed hits such as the most recently released Hollywood blockbusters as well as Japanese Adult Videos. QVOD has two things going for it: demand for these contents is high and “inelastic”, while providing services to small websites helps QVOD captures the “long tail”. These factors have helped QVOD immensely, as the company started to make money back in 2009, before it even hit mainstream.
In the same year, Hu Shuli, one of China’s best known reporters and the chief editor of Caijing, one of China’s best known financial magazines, left her post, taking almost of the entire roster of her previous company. She promptly started a competing company, Caixin, which aimed to become a provider of “integral financial media content”. To this end, Caixin has established magazines, websites, video sites, publishing houses, mobile apps, and has started to host conferences.
On paper, Caixin has been a success, not only has the company quickly became one of Chinese best known financial media properties; it has also attracted investments from the likes of Zhe Jiang Daily Media Group and Tencent.
However, once we dig deep, we can see that Caixin is losing money head over heels. In the last yearly audit performed on July 2011, Caixin Media’s revenue exceeded 30 million Yuan, with an operating loss of more than 33 million Yuan and a net loss of more than 14 million Yuan.
This shouldn’t come as a surprise. Across the Pacific, the Wall Street Journal is doing well, especially when it is compared to other media properties. Both print and online circulations of the Journal have risen every quarter since it was folded into the News Corporation in 2007. The Journal is also one of the few media properties that make money on the digital side. With an effective pay wall, the Journal’s digital revenues were split almost evenly between advertising and subscription.
Yet the Journal has not done nearly enough to justify it highly controversial 5 billion dollar purchase price, and is one of the reasons why The News Corporation has decided to split in two, separating its more valuable television and film assets from newspapers’ dead weight.
Moreover, moving online into the digital world may be the future, but right now relying on online and mobile revenues is equal committing hara-kiri. The Journal’s revenue from the digital side is less than half of its revenue from the traditional printing business; this ratio becomes more lopsided in regard to advertising, as print still garnered 85 percent of the total advertising revenue.
The Journal is not the only top media property struggling. The New York Times is doing better than expected, but its valuation is peanuts compared to the other vaunted leaders of industry. The world’s greatest aggregator and free rider Google has a market value of more than 200 billion dollars, while the New York Times Company, widely acknowledged as the producer of the world’s finest content, is barely worth Google’s spare change, with a market value of slightly more than 1 billion dollars.
What does the divergent fate of QVOD and Caixin tells us? If you have billions like Pony Ma or Rupert Murdoch, by all means buy media properties, as they enhance your influence and give you prestige. But if you want make money, traditional media is not the way to go, it’s better to figure out a way to serve the proletariat, even if that means serving them the likes of Asami Yuma.
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