(Chinese Version)

On March, 15th, 2016, Douyu TV, an online platform for live videos of people playing games, has raised $100 million in a funding round led by China’s Internet giant Tencent Holdings Ltd. While Tencent invested $61, existing investors Sequoia Capital China, and Nanshan Capital also participated. The funding values Douyu TV at over $1 billion, making it the latest unicorn in China. The investment must have been a boon for the Chinese live video market in 2016. While Meerkat, the first mobile live video platform around the world, ceased to provide live video service, its Chinese counterparts received a huge sum of investment. According to IT Orange, there are over 202 startups providing live video service in China. However, as far as I’m concerned, the investment was not at all a boon, but rather a signal for fierce competiton.

Huge cost

Driven by the series of investment, all the major Chinese live video platforms have begun to burn money in order to seize the market. Two sectors they spent the most are buying for larger Internet bandwidth and paying for game show hosts.

In the US, live video platforms don’t need to spend any money buying for larger Internet bandwidth, since American users have to pay more money to enjoy video service. Thus, American mobile carriers are obliged to open its bandwidth to live video platforms.

In China, however, live video platforms are supposed to pay for the larger Internet bandwidth. According to some insiders, a live video platform with over 1 million users online at the same time will have to spend 30 to 40 million RMB for the larger bandwidth. Statistics also suggest that Huya.com’s budget in this sector was over 260 million RMB for 2015, that is, over 20 million RMB for each month.

At the same time, live video platforms also have to pay hosts an even larger sum of money. After Caomei (which means ‘strawberry’ in English), a popular player of League of Legends, retired in 2014, he was signed by Zhanqi TV with an annual salary of 5 million RMB. However, it is reported that his monthly salary was merely 20,000 RMB before he retired, which aroused heated discussion on the Chinese Internet. However, this is only a showcase of how high the salary for hosts could be. With the entry of Douyu TV and Zhanqi TV in the market, the annual salary for hosts has rose from over 100,000 to 10 million RMB.

As far as I’m concerned, the Chinese live video market will witness a major shift in 2016. With the rising expenditure in platform operation and content production, live video platforms who failed to receive enough investment in 2016 will certainly be driven out of the market.

Huge loss

Chen Shaojie, CEO of Douyu TV, once told the media that Douyu TV was not in a hurry to make profit, but it had already been making some attempts to do so. The statement suggested however that Douyu TV must still be buring money instead of making any profit. Li Xueling, CEO of Huanju.cn, once revealed that over 700 million RMB was spent in its live video platform Huya.com. However, statistics suggest that the quarterly revenue for Huanju.cn was 55.0, 85.3 and 82.4 million RMB for Q1, Q2 and Q3. Suppose the revenue for Q4 was 90 million RMB, then Huanju.cn would face an annual loss of 378 million RMB in 2015.

Among the top six live video platforms (Douyu TV, Huya.com, Panda TV, Zhanqi TV, Longzhu.com and Huomo TV, sorted by market share), Douyu TV and Longzhu.com are reported to be losing money. Whether we admit it or not, losing money has become the rule in the Chinese live video market, not the exception.

Worse still, money-burning is more severe in the live video market, since these live video platforms not only have to pay a great deal for larger Internet bandwidth and hosts, but also suffer from the incomplete business model of the market.

Since the Chinese live video market began to rise only for one or two years, few platforms would post too many ads, for fear of damaging the user experience. Even those who do post ads at slide bars, those ads are mostly about platforms themselves. In addition, few live video platforms can receive the copyright to live broadcast key game events, let alone hold gambling activities around them, so they are left to hold their own tiny game events.

The way out

At present, the Chinese live video platforms vary a great deal. Some are mainly about games, others about online education, still others about e-commerce guide-purchase. In my humble opinion, platforms owners should not only discover even more segment markets and provide live video service for sports and cultural events, for example, live broadcasting sports events and music concerts, but also begin to make profit, for example, by selling VIP service for music concerts and posting ads.

At present, most live video platforms are about games and music. If they can discover more areas and provide more diversified contents, the Chinese live video market might be able to develop more healthily.

To be more specific, different live video platforms can focus on different contents, so that users can turn to different platforms when they are looking for different types of contents.

Moreover, different platforms can focus on different crowds, such as the post-90s, post 95s, and post-00s.

In conclusion, opportunities and risks co-exist in the Chinese live video market in 2016, and only time could tell who could laugh the last.

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[The article is published and edited with authorization from the author @Li Jianfeng, please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.