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Would the Rise of Short-form Video Bring the Fall of OTT in China?

As Chinese users are enthusiastic about short videos within tens of seconds, large Chinese online video service (OTT) operators, who dreamed of a "Chinese version of Netflix" based on a huge 1.4 billion population, are struggling.


According to Chinese media such as the Global Times on the 19th, Baidu's OTT business iQIYI had 14.8 million members as of September 30 last year, down slightly from 15.8 million in the same period last year. Last year, iQIYI lost RMB 3.3 billion (about 566 billion won).


Photo Source : Seoul Economist

Along with Alibaba-based Youku and Tencent Video, iQIYI is considered as three biggest players in China's OTT industry.


Photo Source : Medium

At the conference call, Gong Yu, the chief executive officer of iQIYI, analyzed that due to the influence of COVID-19, the supply of content was disrupted, leading to the subscribers' departure. The industry points out that beside the effect of COVID-19, China’s large OTT operators are experiencing a vicious cycle of long-term deficits, reduced competitive content investment, and membership departure.


According to the economic media 'Cai Lian', as people stay longer at home, almost all Internet entertainment sectors have developed significantly, and there is only one exception, which is the 'long video' sector. In addition, there exists a growing skepticism in the industry due to the lack of the competitive content and prolonged deficit.

The crisis of Chinese OTT operators focusing on "long videos" is not limited to iQIYI, so competitors Youku and Tencent videos are also struggling. Total losses of the three companies exceeded 10 billion yuan and 7 billion yuan in 2019 and 2020, respectively.


A more structural problem is that Chinese consumers' preferences are rapidly shifting from existing "long videos" such as dramas and movies to intense "short videos" within tens of seconds.


Photo Source : Jing Daily

The number of subscribers to the Chinese versions of TikTok, Douyin and Kuaishou, has exploded while those three OTT platforms in China is shrinking.


Hong Kong's South China Morning Post (SCMP) has predicted on the 16th that 2021 will be a short video year in China. This is because Tencent Group's WeChat (largest instant mobile chatting application in China) and NetEase, an online game company, are ready getting ready to jump into China's short video market, which consists of two subsidiaries of ByteDance Group, Douyin and Kuaishou.




In particular, the leading company, Douyin, has downloaded more than 1 billion times and has more than 600 million daily active users. In addition, Bilibili, which has a lot of videos uploaded by users, is rapidly growing as it penetrates the absence of YouTube.


As the content trend is rapidly changing all around the world, it is expected for online platforms to be prepared for shifting taste of the content consumers and supplying high quality content in global media market.


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