Since becoming available in
mid-February, episodes from season two of U.S. political television drama House
of Cards have been streamed nearly 30
million times in China, potentially
viewership. (Netflix, the only U.S. platform on which the show can legally
be viewed, does not
disclose usage data.) And it has all been legal: While China is commonly seen
as a haven for copyright pirates, with the bulk of Western content consumed via
bootlegged DVDs or illegal downloads, the environment around web-based content
is changing rapidly. That means even House of Cards' portrait of
skulduggery and sex on Capitol Hill is nonetheless being delivered through a
squeaky-clean mechanism -- one that appears to violate neither Chinese nor U.S.
Most mainland Chinese have watched protagonist
Frank Underwood's machinations, not to mention other hit U.S. shows like sitcom
The Big Bang Theory and action-horror series The Walking Dead,
through Sohu.com. The Chinese web giant,
which offers a viewing experience similar to Netflix's but without a
subscription fee, purchased the rights to these series. Licensed
viewing on Sohu.com and other web platforms like Tencent and Youku Tudou, China's largest video site,
are helping to change the notion that China is a country of pirated content.
Given these developments, the day when U.S. content producers can rely on
significant revenue streams from distribution to China might not be far off.
Internet streaming may be an unlikely
antidote to the culture of piracy that has drawn the ire of content producers in China and
abroad. It was not long ago that a U.S. show as popular as House of Cards
would likely be viewed in China almost exclusively via either illegal download
or bootlegged DVD. Knockoff DVDs can still be purchased for $1 or $2 per disc throughout
the country, often from vendors in permanent storefronts operating with tacit
government approval. As recently as 2013, when I was living in China, my
favorite DVD vendor in the provincial capital of Kunming was situated on a
popular pedestrian street next to a bubble-tea shop and sold everything from
recent Oscar winners to lecture series by popular Yale University history
professors. Uniformed police often staked out the street, but the proprietor, a
nice man who evinced a genuine love for cinema, paid them no mind -- they were
more worried about drunk tourists than copyright infringement.
Shops selling discs that were daoban, or pirated, have long been the most straightforward way to obtain or watch foreign
films in many parts of China. Their popularity had an enormous payout, as
Chinese state media reported $6 billion in pirated DVD sales in 2010. But
licensed web streaming is now starting to poach black-market consumers, and
some bootleg-DVD hawkers are already complaining of a dip in demand.
The change in approach has not sprung
from a crisis of conscience among China's would-be bootleggers. Instead, as the
domestic Chinese film and television industry continues to boom, more domestic
Chinese companies have an interest in protecting their borrowed content from
piracy. Derek Bambauer, a University of Arizona law professor who specializes
in Internet law and intellectual property, explained to Foreign
Policy that for the most part, only foreigners used to be interested in
protecting foreign intellectual property in China. But now, "there are domestic
interests as well," such as Chinese film production companies, the powerful China Film Group, and online video platforms like Sohu.
That means that Chinese courts "have an interest in enforcing intellectual
property law," he said. (Sohu did not reply to repeated requests for comment.)
Over the past several years, Chinese
web giants -- including Sohu's main competitors, Tencent, Youku Tudou, and
Baidu -- have raised hundreds of millions of dollars to
develop their online video-streaming platforms and enter into licensing
agreements with Western entertainment companies like Disney and Sony. To protect their investments, China's
web companies find themselves unlikely allies of U.S. producers, and the former
have shown themselves willing to go to the mat to protect their investments. In
November 2013, a group of Chinese entertainment companies that included Youku
Tudou, Sohu, and Tencent joined the Motion Picture Association of America to
file a $50 million lawsuit against Baidu for alleged video piracy,
and Youku Tudou now employs a team of dedicated Internet scourers who patrol the Chinese Internet for
pirated content. Fearing expensive fines and other legal repercussions from
courts that have turned serious, Chinese web hosts are clearing pirated content
from their domains. In one case, China
Daily reported that Baidu scrubbed 5.8 million links
to pirated material in the wake of a government campaign against piracy.
Smaller companies that focus more of their services on unlicensed videos have
been shut down entirely.
None of this means U.S. content
producers are seeing massive bumps in revenue as a result. Charles Zhang, the
founder and CEO of Sohu.com,
recently estimated that the annual payout this year from
Chinese websites would be from about $100 million to $150 million for U.S.
television shows, though he told the Associated
Press that this amount could reach $500 million by 2016. A U.S.-backed
company might theoretically find more commercial success if it started its own
content platform in China, but that's unlikely. Major U.S. video Internet
platforms Netflix and YouTube are both blocked there -- though
Chinese authorities don't admit it. Alternatively, a U.S. company could acquire
an existing platform already blessed by Chinese authorities, but they have been
cool on accepting foreign dollars for domestic web platforms. (China watcher
Bill Bishop explained that foreign firms are generally "blocked from Internet
M&A [mergers and acquisitions] of any significant size" in China.)
Censorship also remains an obstacle.
Streamed material may be edgier than what appears on Chinese television, House
of Cards being a potent example. But streamed content is easier to
scrutinize and thus censor than bootlegged DVDs passed between friends and
hawked on city streets. Chinese censors routinely trimmed down films shown on the Chinese big screen to
make their messages more amenable to the Chinese Communist Party line, and it
is easy to see how censors could exert a similar grip over streamed content.
CNN has already reported that the third episode of U.S. crime
drama The Blacklist has been removed from Chinese video-streaming
services, probably because the plotline includes a Chinese spy killing an American
CIA agent. Perhaps more pernicious is that some market watchers have feared that state outlets, like China Central
Television, will use their considerable influence to exclude private-market
entrants, given that China's telecoms -- and thus Internet bandwidth -- are
under government auspices. Despite all these countervailing
factors, revenue from online videos in China, which mostly flow to private
companies, has increased 42 percent, from $1.4 billion in 2012
to about $2.1 billion in 2013.
As an increasingly wired Chinese populace turns online for
content, the sun may be setting on the still-ubiquitous bootleg-DVD shop, which
will give way to private Chinese web companies united behind a desire to
protect intellectual property. Meanwhile, Western content producers are waiting
to see just how big the payout will become. But because powerful Chinese state
actors retain the authority to derail the enterprise at any time, it's
impossible to predict how these dynamics will evolve. Perhaps House of
Cards' Underwood said it best: "Money is the McMansion in Sarasota that
starts falling apart after 10 years. Power is the old stone building that
stands for centuries."
Xia Yihua and Elisa
Yang contributed reporting.