To pay or not to pay? (4)

Change the model

Despite the lack of enthusiasm for fee-paying services, a lot of domestic online video websites are continuing to invest heavily in purchasing copyrights to movie and TV series in the belief that they will someday gain wider recognition in the local market.

Youku Tudou Inc, the nation's top online video platform in terms of audience, signed a five-year deal with Sony Pictures Television in early November to introduce over 300 films, both new releases and classic movies, to Youku's paid content platform. The firm has also signed licensing deals with seven other major Hollywood studios, including DreamWorks and Paramount.

It spent $19.5 million to buy video content in the third quarter of 2012, Youku said in its quarterly financial report in late November.

Video sites including tv.sohu.com, iQiyi.com and pptv.com also told the Global Times they would continue investing in paid content and exploring ways to improve their VIP systems over the next year.

"Paying for video content will definitely become the future trend in China, although it will take three to five years before there is mass acceptance of the idea," Xiao Mingchao, vice president of Beijing-based market research firm Sinomonitor International Co, told the Global Times.

Some firms are taking a different approach. NASDAQ-listed ku6.com, which has stopped buying pricey content since the second half of 2011, is one of several online video companies steering away from the model of offering TV shows and movies.

The company has focused on user-generated content instead, and now has 200,000 users who create original videos, according to CEO Shi Yu. These users can get up to half the revenue earned from the videos they create and that are hosted on ku6.com.

Many of them produce high-quality and entertaining content, Shi said. "This is much more affordable than purchasing copyrights for premium video content, and above all it involves unique content that is unavailable elsewhere," Shi noted.

"The industry will be further consolidated in years to come as competition ramps up, and there will only be a few players left," Shi said. "By focusing on a different model, I believe we could be one of the final winners."