China Online TV License Fees Surge

As more and more people in China are glued to their computers taking in the latest TV comedy and drama series, copyright license fees are skyrocketing. The price surge has led some industry insiders to warn of an emerging bubble, but increased competition from new market entrants with deep pockets, such as Baidu, is likely to keep prices rising and make life difficult for smaller, venture-backed firms like Youku and Tudou.

The average price for a copyright license to show a TV series online is $5,900 to $7,400 per episode, with popular series costing much more. Broadcast rights for the show Marriage Defender recently sold for $22,150 per episode, and the new Journey to the West, to be shown next year, went for a record-shattering $41,350.

The numbers are drastically higher than in the past. Last year, Sohu bought the rights to show Golden Wedding 2 for $2,950 each episode, and all 81 episodes of My Own Swordsman sold for just $14,770 in 2006.

"Over the past year, the money spent by video sites to acquire copyright licenses has increased 10-fold or so," said Liu Dele, chief financial officer of the video-hosting site Youku.

The sharp rise is attributed to a growing number of people watching videos online in China. There were 240 million such viewers last year, 46% of whom called the Internet their most important video source.

Video hosting sites are willing to spend the money to establish their brand and drive up advertising money.

Nevertheless, the surge in prices is proving to be a heavy burden. Earlier this year, Ku6.com said it will spend $44.3 million to acquire TV series copyright licenses, and Youku.com raised its annual budget for the licenses to $8.9 million.

"It would be more typical if only 10 TV series or so cost around $14,470, and those that cost $5,900 to $7,400 returned to $2,950 to $4,430," said Ma Ke, the general manager of the department responsible for obtaining copyrights for entertainment videos at Sohu.