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Entertainment industry booming as tech-savvy youths pay to play

(Source: China Daily Africa Weekly) Increased wealth and education, and access to internet services, shape new generation’s desire for games, animation, drama and films

As the purchasing power of the tech-savvy younger generation grows, a whole new business has emerged surrounding intellectual property rights related to online literature, TV dramas, films, digital games and comics. And that business is gaining momentum across China.

The pan-entertainment industry has become a key driving force of the nation’s economic growth. In 2017, it generated more than 480 billion yuan ($69.4 billion; 60.4 billion euros; £53 billion) in economic output, with an increase of more than 15 percent year-on-year, according to a recent report by database company Gamma Data.

High-definition smartphone screens, powerful processors, booming mobile internet technologies and multifunction software have made reading and watching videos on phone screens more enjoyable and convenient.

Statistics from the China Internet Network Information Center demonstrate the rapid growth of the blossoming internet trend. Data show that among the 772 million Chinese netizens, 97.5 percent are mobile internet users, providing a massive base for the new digital business.

Millennials, particularly those born from 1995 to 2000, are demanding a different entertainment culture than what was popular among their parents.

Chen Rui, chairman of Bilibili, a popular Chinese video-sharing site boasting the largest group of young Chinese anime, comics and gaming fans, says there is a clear difference in the demand for culture and content between the younger and older generations.

“The increased material wealth, high-quality education environment and the access to internet services are shaping today’s young generation’s diversified and personalized cultural needs,” Chen says. And those young consumers actually are willing to pay for the entertainment content they really love.

Xue Yongfeng, an analyst at internet consultancy Analysys in Beijing, says that previously, major internet users typically only paid for real-life items, but now they’re willing to pay for virtual online content products.

“With the surge in average incomes and the changing paying habits, now more Chinese netizens are willing to pay to access online books and articles, videos and movies, and music.”

Seeing the emerging trend, an increasing number of domestic companies are introducing a wide range of related products targeting the young generation, and many have been reaping the benefits.

Recently, the online drama The Story of Yanxi Palace, coproduced by online video-streaming service provider iQiyi and Huanyu Film, has gained a huge following among Chinese netizens, becoming another popular screen work featuring concubines in the Qing Dynasty (1644-1911).

The hit drama has gained more than 15 billion online views, iQiyi says. It’s now available in more than 70 markets globally, making it one of the most widely distributed series produced in China.

The TV series has also attracted a growing number of visitors to Beijing’s Palace Museum, also known as the Forbidden City, where the drama is set. The lesser-known Yanxi Gong, where the heroine of the drama lived, has become a new hot spot in the museum.

There also have been increased orders for reproductions of the heroine’s hair ornaments, likewise led by people’s interest in the drama.

Beijing-based iQiyi, an online video unit of Chinese internet giant Baidu, raised $2.25 billion in its initial public offering this year, saying it will use half of the net proceeds to expand and improve its content offerings.

Ma Shicong, an analyst at Analysys, says key online video participants who invest lots of money to fuel the development of the sector will be rewarded with larger shares of the market.

Founded in 2010, iQiyi reported continuous growth in its revenues, hitting 17.4 billion yuan last year, a jump of 54.6 percent over the previous year.

A key driver behind iQiyi’s revenue growth is the subscription fees for its online video-streaming services. Revenue from the subscription fees accounted for 37.6 percent of its total income in 2017, compared with an 18.7 percent share in 2015. The company says it had more than 50 million subscribers at the end of last year, and about 126 million daily active mobile users in the fourth quarter of 2017.

Three major Chinese internet giants – Baidu, Alibaba and Tencent, collectively known as BAT – are accelerating the push to invest in entertainment units, betting big on the booming domestic market.

In particular, they have paid attention to online literature genres, which have revolutionized the entertainment industry and triggered a vast array of movies, TV dramas, games, animation and comics. For instance, the megahit drama Ten Miles of Peach Blossoms was based on popular online stories.

Last summer, iQiyi launched a new plan to connect its various IP resources, including online literature, TV dramas, movies, gaming and products based on those IPs.

Mobile gaming is another sector contributing hugely to the new business. Gamma Data noted in its report that mobile games based on other forms of IP products contributed 74.56 billion yuan to China’s economic output in 2017. They also accounted for more than 60 percent of the total revenue of the mobile games segment.

Wang Xu, chief analyst at Gamma Data, says that as the country’s demographic dividend is disappearing, gaming developers need to explore new methods of business expansion.

The report notes that the digital games segment occupied around 40 percent of pan-entertainment industry sales last year and hit 200 billion yuan in revenue. Gaming is playing a key role in boosting the overall development of the pan-entertainment market, it says.

Perfect World, a Chinese movie and gaming company, is now targeting the young digital generation with IP-protected products, spanning such categories as anime, comics and gaming, movies and TV dramas.

Lu Xiaoyin, chief operating officer of Perfect World Games, said at a company news conference this year in Beijing that young people usually prefer the specific culture embodied in the game, and they also like to see the application of the latest technologies.

Tong Qing, senior vice-president of Perfect World, says, “There is a growing trend of spinoffs from hot IP rights related to games and other forms of entertainment products.”

Because China is at the forefront of the world’s online culture industry, it’s also a pioneer in dealing with new problems that pop up.

Si Xiao, president of the Tencent Research Institute, said at a culture summit in Shenzhen, Guangdong province, in May that the online literature business loses more than 10 billion yuan each year to piracy.

According to Si, IP-protected products have gradually become the key to drive the online culture industry, and the industry should pay more attention to IP protection.

“More efforts are needed to protect IP from infringement and piracy, which will also better encourage creation and innovation,” Si added. “It will still take years to foster a better environment, and I believe new technologies such as blockchain will help protect IP.”

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