Chinese Online Video Companies Fight for Market Share, Licenses

Chinese P2P startup Xunlei has sued its competitor Sohu for copyright infringement, according to the Shenzen Daily. Xunlei is alleging that Sohu’s search engine, Sogou, is infringing on copyrights related to Xunlei’s P2P software as well as its own search engine, Sohu had previously filed its own copyright infringement lawsuits against Xunlei and other Chinese P2P vendors.
China has long been a P2P video wunderkind of sorts. Efforts to establish P2P-based consumer video platforms like Joost and Babelgum have largely failed in the U.S. and Europe, but similar offerings attract millions of users in China. However, the Chinese market is saturated with literally dozens of video vendors, and efforts to grow their business beyond the PC have stalled due to strict government licensing requirements.
Xunlei is a popular Chinese P2P client that combines BitTorrent with web-based downloads. The company’s search engine links to TV shows and movies hosted on various ftp servers and web sites. Users can download these files and automatically accelerate their downloads through Xunlei’s P2P functionality. Gougou obfuscates these links in order to get users to access the content with its own client and sign up for its premium services, which include remote downloading to Xunlei’s servers.
However, that didn’t stop Sohu from allegedly crawling these sites as well and publishing the direct download links without any Xunlei-specific code. Xunlei wasn’t too happy about that and decided to sue last week. Some reports suggest the lawsuits include complaints about cracked versions of Xunlei appearing in Sohu search results. Sohu previously sued Xunlei for broadcasting a TV series that the company had exclusive online rights for, and it recently announced further lawsuits against Xunlei and other competitors under the helm of a newly formed “Online Video Copyright Union.”
You know the fight for market share is getting ugly when online video companies do the dirty work for rights holders and sue each other for copyright infringement. The irony of these lawsuits is that much of the content indexed by both search engines clearly isn’t licensed to begin with. We asked both companies for their side of the story, but haven’t heard back from Xunlei, and just got a brief “no comment” from Sohu.
The lawsuits shouldn’t really surprise anyone who has been following the Chinese online video industry. The country is home to a number of large P2P video platforms as well as YouTube-like sites. P2P streaming service PPLive, for example, touts up to 30 million active viewers per month, and YouTube-like Youku boasts 140 million visitors per month. Both compete with at least a handful of similar services, many of which also have an impressive user base. There isn’t one clear market leader like YouTube in the U.S., and Chinese online video business models still seem to be in a flux.
At the same time, it’s been getting harder for Chinese video ventures to grow their market beyond the PC audience. PPStream and Xunlei have tried to get their platforms on set-top boxes and connected TV sets, but those efforts have stalled because of the Chinese State Administration of Radio, Film and Television. The government agency views set-top box offerings as equal to over-the-air or cable television programming, which means that online video startups would need to get a special Internet TV license. That hurdle seems to be so high that a Chinese TV set manufacturer actually canceled plans to include PPStream in one of its connected TV sets in September.