The best part of China's online video industry recently launched a round of overseas listings. IQIYI, Inc., Bilibili Inc. 's website (Bilibili) and HUYA Inc. reportedly submitted listing applications to the US Securities Regulatory Commission respectively. Another source said that live broadcast platform Yingke plans to IPO in Hong Kong this year, while another live broadcast website, DouYu International Holdings Limited, also revealed that it is preparing for IPO in Hong Kong.

The year 2005 is known as the first year of China's online video industry. Around this year, video websites such as Youku, Tudou and our music network have emerged one after another. China's video industry has gone through nearly 13 years, after business model exploration, money war, copyright war, unknown profits and other troubles, today's Chinese video website video players are still not living very well. With the entry of BAT, the whole network video industry basically presents a tripod situation of Youku Tudou (BABA), Tencent video, iQIYI, Inc. (Baidu, Inc.).

The problem of profitability is still a lingering problem for Chinese video websites. While the "money war" has made the whole industry more and more popular, is the introduction of the payment model a dead end or bright willows? The fierce battle of video websites is raging, and the rise of mobile short videos has added many new variables to the whole industry.

An online video website-- from letting a hundred flowers blossom to the top three for hegemony

1 A hundred flowers blossom in the online video industry

The period from 2005 to 2009 is the budding period of China's online video industry, which seems to be friendly, but in fact it is surging undercurrent. Soon after, the industry ushered in a period of explosion, a large number of online video websites emerged in 2009 ~ 2011, Letv Video, iQIYI, Inc., Sohu.com Ltd Video, Bilibili and other video sites were established one after another, and around 2010, video sites began to achieve IPO one after another, with Youku, Tudou and other pioneers landing on Nasdaq one after another. For a time, the online video industry let a hundred flowers blossom and a hundred schools of thought contend.

However, online video is a very asset-heavy industry, and the industry pattern of letting a hundred flowers blossom is doomed to be unsustainable. The copyright fee is high, the realization form is single, the user stickiness is low, "burn money" become the only way for the video website to survive, the industry appears "either buy or die" situation.

2 BAT entry-industry integration, three major video websites dominate

"Burning money" is the only way for video websites to survive at that time, but if you don't pay attention to it, it is easy to set yourself on fire, because there is no end to money burning and profits are in the distant future. With the inevitable integration of the industry, online video, as an important traffic portal, attracts the three giants of BAT.

With the entry of BAT, the pattern of the online video industry has changed dramatically, those who can't afford to burn money, or those who hold the thighs of giants, or those who don't have time to hug, are all dead.

IQIYI, Inc. under Baidu, Inc., Tencent Video under Tencent, and Youku Network under BABA have firmly occupied the top three positions in online video. Among them, Youku is weak, no matter in terms of revenue or the number of monthly active users, it lags behind iQIYI, Inc. and Tencent video. And the long-term leader iQIYI, Inc. is also gradually surpassed by the rapid Tencent video. Since October last year, Tencent video has surpassed iQIYI, Inc. in the long video field in an all-round way. The number of paid households updated on March 18 reached 62.59 million, even more than Netflix's paid members in the United States (at the end of 2017).

The so-called one general's success is withered, the hegemony of Tencent video, iQIYI, Inc., Youku three giants, trampling on the bodies of countless video websites.

PPS:PPS announced profits in 2009, once occupied a place in the video site, and received a lot of venture capital, but because several times IPO hopeless, but also in the money-burning video industry, did not have a strong background of the "godfather", can only be in the second-tier camp struggling. On May 7, Baidu, Inc. announced the acquisition of PPS video business for $370 million and a merger with its independent video company, iQIYI, Inc.. From then on, people may only remember iQIYI, Inc., but no one can think of PPS.

酷6：Ku6, which was founded in June 2006, was once the third best video website. In 2008, Ku6, which was founded for just 2 years, developed rapidly, won two investments in a row and took the lead in winning radio and television licenses; in November 2009, Ku6 walked together with the entertainment empire and successfully listed on NASDAQ through the integration with Huayou century. it became the first video website to be listed in the world. After leaving sadly because of differences between founder Li Shanyou and Chen Tianqiao, Cool 6 experienced troubles such as stock price falling below its offering price, bloody layoffs, original team purge, delisting from US stocks, and so on.

56网：Founded in April 2005, it has developed rapidly in the first 3 years and was once among the top three video websites. In 2008, due to video review errors and was shut down for 30 days, the station closure storm caused an irreversible crisis to the 56 network, 56 network began to fall behind. The "money-burning competition" in the video industry is becoming more and more intense. 56 networks have no money to increase bandwidth, smash copyrights and promote marketing, and they are quickly overtaken by competitors. Finally have to face the fate of being acquired by Sohu.com Ltd video at a low price.

Tudou:Founded in April 2005, formerly known as Tudou, it is the earliest and most influential online video platform in China. Tudou was once in the first camp of China's video industry, but Tudou, which could have gone public first, was delayed because of the divorce of its CEO Wang Wei and his ex-wife. Finally, in front of Youku IPO after the strong expansion, after Xunlei Ltd, Sohu.com Ltd, iQIYI, Inc. 's efforts to catch up, and finally ended up being acquired.

The online video industry can be described as a microcosm of the entire Internet industry in China. Under the shadow of the BAT three giants, each industry has a tendency to destroy and destroy.

The second half of the video industry-- the sudden rise of short videos

Tencent video, iQIYI, Inc., Youku as the representative of the long video field is raging, but do not know, the quiet rise of short videos, playing another world.

The rise of short videos has three backgrounds:

1. China's Internet has entered the content era, and with the rising traffic cost, content has become a traffic portal for more efficient access to accurate users.

2. The mobile terminal surpasses the computer side to become the most important traffic entrance, and the fragmentation characteristics of the mobile terminal provide the soil for the rise of short videos.

3. The characteristics of the short video UGC meet the social and personality catharsis needs of young people.

According to Analysys, the overall short video market has grown strongly since 2017, reaching 334.1 million and 109.9 million active users respectively by December on the integrated short video platform and the short video aggregation platform. In terms of the occupation of user time, the use time of short video integrated platform and short video aggregation platform reached 3.4857 billion hours and 1.0256 billion hours respectively in December. All figures have grown by much more than 100% compared with the beginning of the year.

In the field of short videos, Tencent has a much better sense of smell, and his investment Kuaishou Technology firmly occupies the first place in the market share by virtue of his first-mover advantage, followed by Jinri Toutiao's three short videos app-- Volcano Mini Video, Watermelon Video and Tik Tok. You know, Jinri Toutiao does not have the investment of BAT. In the field of short video, it successfully breaks through with its three short video app.

Jinri Toutiao is a super traffic portal. These three app are like video versions of Jinri Toutiao, with frighteningly high user growth, especially Douyin, which was launched only last September to quickly become the fourth in the industry. The short video industry recommends to read another masterpiece of Gelon:《Douyin and Kuaishou Technology, Toutiao and BAT》

III. Prisoner's Dilemma in Video Industry

China's online video industry is caught in the classic prisoner's dilemma.

In the video industry where content is king, users are content-oriented.Where there is attractive content, there will be more users. This makes video websites have to continue to invest money to buy high-quality content, in order to maintain the retention of users. At present, video websites are still doing channels, and self-made content accounts for only a small part. With the continuous growth of copyright fees, the cost puts great pressure on video sites. At the revenue end, the way of realization of video websites is single, and almost all video websites take advertising revenue as the main income. The imbalance between income and expenditure has long plagued China's online video sites, and losses are and will continue to be the main theme of these sites for the foreseeable future.

Video sites form a typical "prisoner's dilemma", no investment is the best solution, no one will lose money, but can not gain additional traffic and future cash. And once your opponent starts to invest more, you have to take the risk of losing traffic and future cash opportunities. This forces competitors caught in the "prisoner's dilemma" to scramble to invest money.

Capital determines the content, and once the carriage of capital begins to accelerate, it cannot stop at all.

4. IQIYI, Inc. goes public in the United States-- want to be China's Netflix?

According to iQIYI, Inc. 's updated prospectus, iQIYI, Inc. will go public in the United States on March 29, raising up to $2.73 billion, and the newly announced amount of financing is 42% 58% higher than the plan. According to the newly disclosed data, as of February 28, 2018, the number of paid members of iQIYI, Inc. has reached 60.1 million. The number of paid members of iQIYI, Inc. was 50.8 million as of the end of December 2017, according to the prospectus submitted publicly for the first time.This means that within two months, iQIYI, Inc. has added 9.3 million new members.

The growth of members has pushed its revenue to maintain rapid growth in the past few years, with an increase of 54.6% last year compared with the same period last year. However, the rapid expansion still cannot get rid of the embarrassment that the higher the revenue of the video website, the greater the loss. From 2015 to 2017, the net losses were 2.575 billion yuan, 3.074 billion yuan and 3.736 billion yuan respectively, and the net loss increased year by year.

It is still difficult for iQIYI, Inc. to jump out of the "prisoner's dilemma". On the other hand, Netflix, a peer in the United States, has already begun to make a profit and is riding in the market. Maybe we can find a way to solve the prisoner's dilemma in Netflix.

The secret of Netflix's success is actually very simple. The continuous production of high-quality homemade dramas makes Netflix invincible. For Netflix, it is recommended to read the Gronghui column "Netflix of attack (NFLX.US): from spoiler to leader".

Channel + content is the king.

Once the video website that monopolizes the channel begins to do the content, its destructive power to the industry can not be underestimated. From the cost point of view, homemade dramas effectively control the cost of content and reduce the cost of purchasing copyright; from the revenue side, homemade dramas are generally solo dramas, and high-quality solo dramas can effectively improve the retention rate of users.

IQIYI, Inc. 's self-made content has already had a certain influence, including homemade dramas "Tomb robbing Notes", "Old Nine doors" and "undocumented Crime", the original variety show "Strange Theory" and "China has Hip Hop", and even the recent "Hot Blood Street Dance Troupe" have all successfully led the website.

The free system turns to the paid system.

In the past, Chinese video websites played videos for free, and the traffic was realized entirely by advertising. Netflix, on the other hand, has gone to the other extreme without advertising, and its income depends entirely on members' fees. The Chinese market has the characteristics of the Chinese market, and the future trend is to change from a single and extensive way of income to a diversified way of income, and users pay or call it the mainstream.

IQIYI, Inc., for example, saw advertising revenue grow by only about 44 per cent in 2017, while paid member revenue grew by more than 74 per cent year-on-year. The share of member services revenue in total revenue rose from 18.7 per cent in 2015 to 33.5 per cent in 2016 and further to 37.6 per cent in 2017.

So, what the Chinese video website wants to do is very simple, follow the routine of Netflix, in the "smart pig game", be willing to be that little pig.

The end.

Netflix is sweeping the world, and its market capitalization has risen more than 60% so far this year to $140 billion. Netflix's success has set an example for its Chinese counterparts. "burning money" is not a long-term solution, profit is the eternal pursuit of video websites, but this goal for Chinese video websites, which have been losing money for 13 years, I do not know how long to go in the pursuit of profit.

IQIYI, Inc. is difficult to turn around for the time being. The A-share market and the Hong Kong stock market have closed the door to him, and the US stock market has become the only choice. Listing is a means, not a result, and the funds raised will take less than a few years at iQIYI, Inc. 's rate of burning money. IQIYI, Inc., who is divorced from Baidu, Inc., is going to be self-reliant. Channel + content may be able to get through the second pulse of iQIYI, Inc. 's governor.