Factors such as the increased protection of copyright have boosted the development of the digital copyright distribution and digital content provision industry
1. Digital rights distributors and digital content providers
Video content can be distributed after it has been produced and reviewed. Digital rights distributors and digital content providers purchase the corresponding video program copyrights from the video program producers, and the digital rights distributors sell the digital rights to the video program broadcast channels after the integration and promotion, while the digital content providers do not sell the copyrights, and cooperate with the program broadcast channels by providing video content in specific program zones and obtain a share of revenue. Digital rights distributors and digital content providers are important hubs that link upstream video program producers and downstream media channels, and they purchase different types of digital copyrights from many upstream content producers to form a content resource library, and integrate digital copyright resources to sell to downstream media channels according to the specific characteristics and needs of downstream customers, so as to complete the key steps of video content from production to reaching audiences.
2. The upstream and downstream situation of the industry
(1) The development status of the upstream industry
The upstream is mainly video program production companies or digital rights holders such as animation, TV dramas and movies. From 2000 to 2018, with the successive promulgation of the "Regulations on the Administration of Films" and the "Regulations on the Administration of Television Dramas", the domestic film and television drama market was opened to private capital, and the number of film and television production companies and film and television dramas showed a rapid growth trend. In recent years, the supervision of film and television projects has become stricter, and the implementation of regulatory measures such as controlling the number of episodes, cracking down on water-injected dramas, restricting some theme dramas and restricting sky-high remuneration has promoted the further healthy development of the film and television industry, and at the same time, the industry stock market has been gradually reshuffled.
(2) The development status of downstream industries
The downstream is mainly Internet video platform, TV and mobile media operators, including Internet video platforms represented by Tencent, iQiyi, Mango, Youku, etc., mobile video platforms such as Migu Video, Tianyi Video and Wo Video, as well as IPTV, OTT TV and digital TV operators.
With the increasing coverage of the Internet and the advancement of technology, the number of online video users in China has expanded rapidly, from 372 million in 2012 to 1.031 billion in 2022. The huge online video user base has given birth to a relatively strong demand for video program viewing and promoted the development of the online video industry. In order to attract video users and expand the scale of users, downstream media terminals have continued to expand their procurement demand and investment in high-quality video content resources in recent years. After nearly a decade of industry consolidation, industry content, traffic and revenue have gradually tilted towards the top players, and the online video industry has gradually developed into an industry competition pattern dominated by a few companies such as Tencent, iQiyi, Mango, Youku, Bilibili, Douyin, Kuaishou, and Sohu.
On the other hand, with the decline in the price of mobile traffic and the further popularization of 4G and 5G communications, short video media has gradually emerged in recent years. Based on the high national participation and interest of short videos, the Xi of video users using fragmented time to watch short videos has gradually developed, and the scale of short video users has also shown a rapid growth trend. According to data released by the China Internet Network Information Center, by the end of 2022, the number of short video users in mainland China has reached 1.012 billion.
3. The main development opportunities for the development of the industry
(1) The national industrial policy strongly promotes the sustainable and healthy development of the industry
The national industrial policy plays a supporting and promoting role in the sustainable and healthy development of the cultural industry, including new media, digital copyright distribution and digital content provision industries. During the 14th Five-Year Plan period, the Outline of the 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Long-Range Objectives Through the Year 2035, the Outline for Building a Strong Intellectual Property Country (2021-2035), the 14th Five-Year Plan for the Protection and Use of Intellectual Property Rights, the Opinions on Promoting the Implementation of the National Cultural Digitalization Strategy, and the 14th Five-Year Plan for Cultural Development were issued one after another.
According to the Statistical Classification of the Digital Economy and Its Core Industries (2021) released by the National Bureau of Statistics, the industry belongs to the field of "digital content and media" of the "04 Digital Element-Driven Industry" in the digital economy industry, which is the core industry of the digital economy. The "Opinions on Promoting the Implementation of the National Cultural Digitalization Strategy" proposes to consolidate the cultural digital infrastructure, relying on the existing cable TV network facilities, radio and television 5G networks and interconnection platforms to form a national cultural private network; It is necessary to build a cultural digital governance system, improve the comprehensive law enforcement system of the cultural market, and strengthen the supervision of cultural data element market transactions. The Opinions raise cultural digitalization to the national strategic level and make overall arrangements, and further point out the direction for the development of cultural digitalization in the mainland.
The "Outline of the 14th Five-Year Plan for National Economic and Social Development of the People's Republic of China and the Long-Range Objectives Through the Year 2035" clearly states that it is necessary to strengthen the creation, production and dissemination of outstanding cultural works; improve the modern cultural industry system, expand the supply of high-quality cultural products, implement the digital strategy of the cultural industry, accelerate the development of new cultural enterprises, cultural formats, and cultural consumption patterns, and expand digital creativity, network audio-visual, digital publishing and other industries; Cultivating backbone cultural enterprises, with the support of advanced technology and content construction as the foundation, we should promote the deep integration of traditional media and emerging media in terms of content, channels, platforms, operations, management, etc., build a new communication system of "content + platform + terminal", and create a number of new mainstream media and communication carriers.
The "14th Five-Year Plan for Cultural Development" points out that it is necessary to improve the copyright registration and collective management system, improve the copyright protection and trading system, strengthen the protection and operation and development of the whole chain of copyright, strengthen the protection of digital copyright, and promote the development of digital copyright and the integration of copyright formats. Strengthen the management of copyright assets and improve the evaluation system of copyright assets. The plan also aims to accelerate the innovation of financial products and services that meet the development needs of cultural industries and the characteristics of cultural enterprises. Further expand the scale of equity financing and bond financing of cultural enterprises, and support the listing and refinancing of cultural enterprises.
The Outline for Building an Intellectual Property Power (2021-2035) points out that by 2035, the mainland's comprehensive competitiveness in intellectual property rights will rank among the top in the world, the intellectual property system will be perfect, and intellectual property rights will promote the vigorous development of innovation and entrepreneurship. The "14th Five-Year Plan for the Protection and Use of Intellectual Property Rights" proposes to comprehensively strengthen the protection of intellectual property rights, with the goal of building a strong country with intellectual property rights as the goal, and reform and innovation as the fundamental driving force, deepen the reform of the system and mechanism of intellectual property protection, and comprehensively improve the level of intellectual property creation, application, protection, management and service. The deployment of a series of policy documents provides a strong guarantee for the continued health of the digital copyright industry at the policy level.
(2) The continuous development of the national economy has led to the continuous growth of cultural consumption
With the continuous development of the national economy on the mainland, residents' incomes have increased steadily, and the overall consumption level of residents and the scale of consumption in the cultural field have shown a rapid growth trend. According to the National Bureau of Statistics, the per capita annual disposable income of mainland residents increased from 21,966 yuan in 2015 to 36,883 yuan in 2022, and the per capita annual consumption expenditure of residents increased from 15,712 yuan in 2015 to 24,538 yuan in 2022, of which the per capita annual consumption expenditure on education, culture and entertainment reached 2,469 yuan. Residents' expenditures on education, culture, and entertainment have become the fourth largest expenditure after food, tobacco and alcohol, housing, transportation, and communications. The growth of the cultural consumption capacity and level of mainland residents has provided strong demand support for the development of digital copyright distribution and digital content providers.
(3) The number of users and the proportion of payment are gradually increasing
With the gradual increase of residents' income level, the demand for cultural and entertainment services and corresponding expenditures are also expanding. At present, the Internet, digital television, and mobile intelligent terminals have become an important part of people's life and work. At the same time, based on the advantages of genuine content in terms of timeliness and clarity, as well as the gradual rejuvenation of consumer groups and the protection of intellectual property rights at the legal level, users' acceptance of the payment model is increasing, the willingness and proportion of payment are also rising, and the proportion of paid income in the new media revenue structure continues to expand. Taking iQIYI as an example, according to the company's annual report data, the proportion of its membership service revenue has shown a rapid growth trend in recent years, and in 2022, iQIYI's membership service revenue will account for 61.1% of the total operating income, which is 42.7 percentage points higher than the original advertising revenue that accounted for the first proportion, and is the most important source of its income. Mainland video programs have a huge user base, and the benign consumption Xi of users paying to obtain genuine video content will further drive the activity of upstream digital copyright trading and digital content provision market, and promote the healthy development of the industry.
(4) Copyright protection continues to increase
In order to meet the urgent need for copyright protection in the computer network environment, the Copyright Law of the People's Republic of China was amended in 2001, and for the first time established the civil right of "information network dissemination right" in the form of law. In 2006, the State Council promulgated the Regulations on the Protection of the Right to Disseminate Information on the Internet, further promoting the standardized development of online information dissemination in mainland China. In 2010 and 2020, the Standing Committee of the National People's Congress and the State Council further revised the Copyright Law of the People's Republic of China, providing more solid legal support for the healthy development of the copyright market in mainland China. On the other hand, since 2010, the National Copyright Administration, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, and the Ministry of Public Security have jointly carried out a total of 17 "sword network" actions to crack down on online infringement and piracy, which have effectively cracked down on and deterred online infringement and piracy activities to a certain extent. The formulation and improvement of laws and regulations have provided a solid guarantee for cracking down on pirated film and television dissemination and safeguarding the rights and interests of copyright owners, while the continuous strengthening of industry supervision has continuously improved the overall market environment for copyright trading, and the promotion and strengthening of copyright protection measures have played a positive role in promoting the healthy development of the copyright market. The 14th Five-Year Plan for Cultural Development, released in August 2022, once again pointed out that it is necessary to improve the level of rule of law in copyright protection, strengthen law enforcement, supervision and crackdown on infringement and piracy, and continue to carry out the "Sword Net" special action.
4. The future development trend of the industry
(1) The demand for high-quality digital copyright from downstream platforms is expected to continue to increase, providing a broad space for the new media digital copyright distribution and digital content provision industry
In recent years, the scale of mainland netizens and the Internet penetration rate have increased steadily, the scale of online audio-visual users has also shown a continuous growth trend, and the online audio-visual demand of downstream end users has continued to expand. According to the Statistical Report on the Development of China's Internet Network released by the China Internet Network Information Center, by the end of 2022, the number of Internet users in mainland China reached 1.067 billion, an increase of 35.49 million year-on-year from December 2021, and the Internet penetration rate reached 75.6%.
Among them, the number of online video (including short video) users in mainland China reached 1.031 billion, accounting for 96.5% of the total number of netizens. The huge online video user base has given birth to a relatively strong demand for video program viewing, and high-quality video content resources are the core resources for downstream Internet video platforms, IPTV, OTT TV and other media channels to attract and maintain end users. In this context, in order to attract end users, increase platform traffic and maintain the industry position, the demand and investment for high-quality copyright content procurement by various media channels are expected to continue to increase, which is also conducive to the long-term development of new media digital copyright distributors and digital content providers.
(2) The audio-visual service model of TV tends to be innovative and diversified, which brings good development opportunities for the new media digital content business
With the advancement of technology in the new media industry, the types of audio-visual services that can be provided through TV terminals are also more abundant. On the one hand, functions such as on-demand can enable users to get rid of time constraints and watch their favorite videos at any time, on the other hand, in recent years, TV media channel platform operators have begun to gradually explore a variety of audio-visual program viewing experience, in addition to traditional TV dramas, movies and other classified areas, new media platform operators have launched diversified value-added service areas such as online parenting, health care, distance education, etc. In the subdivision area, the pertinence of its audience is more prominent, so the requirements for the personalization and diversification of video content are more and more prominent, which also brings good development opportunities for the new media digital content provision business upstream of new media platform operators. In the future, with the diversified development of TV's audio-visual business, the diversity and innovation level of digital content service models will also be improved, and rich and novel video collection topics will become an important way for the platform to increase user traffic.
(3) New media is showing a trend of cross-terminal integration, and new media digital copyright distribution and digital content providers will pay more attention to the omni-channel rights of copyright
With the rapid development of Internet transmission technology and speed, the new media channels of video programs are also showing a continuous trend of evolution, and new media platforms such as video barrage websites, live broadcast platforms, and short video platforms are emerging on TV, web, and mobile terminals, and the attention of end users is gradually attracted by diversified audio-visual service products. In the future, media channel operators will actively expand the multi-terminal linkage business model, make full use of content resources, platform resources and user resources, and continue to deepen the business model of cross-terminal and platform new media integration such as large and small screen linkage, long and short video linkage, etc., which also requires new media digital copyright distribution and digital content provision enterprises to pay more attention to the resource reserve of copyright omni-channel rights.
5. Unfavorable factors hindering the development of the industry
(1) The copyright management and protection system still needs to be consolidated
Although the relevant state departments and industry associations have made many efforts to crack down on piracy, such as formulating and improving laws and regulations, increasing judicial penalties, and holding the "Sword Network" campaign on several occasions to control online infringement and piracy, it will still take some time for the whole society to establish copyright awareness due to the relatively late start of copyright protection in the mainland. At present, piracy of film and television dramas before they are released still occurs from time to time. Online infringement and piracy not only cause economic losses to participants in all aspects of the video industry, but also affect the healthy and sustainable development of the industry.
(2) The rapid development of short video diverts users from new media platforms
With the popularization of mobile devices and the continuous acceleration of social rhythm, short videos have gradually become an important tool for people's daily leisure entertainment and information interaction. According to the "Statistical Report on the Development of China's Internet Network" released by the China Internet Information Center, the number of short video users in China has reached 1.012 billion by the end of 2022, and it is expected to maintain a growth trend in the future. With the continuous development of short video platforms and the continuous expansion of user scale, digital copyright distribution and digital content service providers focusing on long digital copyrights such as animation, TV dramas, and movies may face the adverse impact of user diversion.
6. The main barriers of the industry
(1) Barriers to the scale of copyright resource reserves
After years of development in the digital copyright market, excellent digital copyright distribution and digital content providers in the industry have formed a certain scale and good brand influence in terms of the quantity and quality of copyright reserves, and new entrants also need to face the barriers of copyright resource reserves. On the other hand, most of the high-quality copyrights have been sold to current industry participants, and even the next authorization after the current authorization of high-quality copyrights has been pre-sold, so it is difficult for new entrants in the industry to obtain a large number of high-quality copyrights in a short period of time, and then they cannot meet the continuous demand for high-quality copyright content from downstream media channels to generate economies of scale.
(2) Evaluation and talent barriers for upstream copyright procurement
With the continuous development of the cultural industry, the number of video programs produced in mainland China has increased year by year and the types of programs have become more diversified, while consumers' demand for high-quality video programs has also increased. Therefore, in the process of procuring video program copyrights, the ability to evaluate and discover the value of copyrighted content is becoming more and more important, and if a large number of copyrights are purchased that are not popular with downstream platforms or audiences, or if there is a large deviation in the pricing at the time of procurement, a large number of copyrights are purchased at a high price but cannot be sold at a reasonable price, it will have an adverse impact on the business performance of digital rights distributors. Therefore, it is particularly important for digital rights distribution and digital content providers to screen out high-quality content and successfully purchase it from upstream producers at a reasonable price by establishing a mature evaluation system that has been in operation for many years and reserving relevant talents with market experience. Due to the relatively short development time of the digital copyright distribution industry in mainland China and the relatively small number of talents with rich industry experience, it is difficult for new market entrants to establish a suitable evaluation system and cultivate a talent team in the short term, so there are also evaluation and talent barriers in the upstream copyright procurement industry.
(3) Barriers to the resources and digital content provision capacity of downstream digital copyright distribution
On the sales side, the number of downstream distribution channels and the strength of operational capabilities determine whether digital copyright distributors and digital content providers can efficiently match different types of copyright resources with customers with diverse needs, so as to maximize the value of copyright. Abundant downstream distribution channels and good sales capabilities will also help industry participants improve their negotiation and price affordability when purchasing from upstream. In addition, downstream platforms are often willing to maintain long-term and stable cooperation with suppliers to reduce the copyright risk of video programs. Therefore, for new entrants in the industry, the establishment and expansion of downstream channels often take a certain amount of time, and the business scale and operating performance of enterprises are often affected when the procurement and sales channels of copyright have not been fully opened, so new entrants in the industry generally face barriers to downstream digital copyright distribution resources and digital content provision capabilities.