Business
Dramatic Changes
The TV drama industry seeks new growth amid the development of online platforms
By Ma Miaomiao  ·  2019-07-01  ·   Source: NO. 27 JULY 4, 2019

An aerial photo of the Hengdian World Studios, one of China's largest bases for film and TV production, in east China's Zhejiang Province on December 4, 2018 (XINHUA)

The Hengdian World Studios, located in the eponymous small town in the eastern province of Zhejiang, is one of China's largest film and TV production bases. But it is used less frequently these days. The studio's website indicated that nearly 30 crews were shooting in its facilities as of June, just half the number from last year.

Statistics from Wind Information, a Shanghai-based service provider of financial data, information and software, showed that investment in the TV drama industry topped 53.78 billion yuan ($7.91 billion) in 2018. But it was only 262 million yuan ($38.53 million) in the first half of this year.

The financial performance of listed companies in the TV drama industry is also lagging. Zhejiang Huace Film and TV Co. Ltd., for example, made a net profit of 211 million yuan ($31.49 million) in 2018, down 66.71 percent compared to 2017. Other leading players, such as Ciwen Media Co. Ltd., Zhejiang Talent Television and Film Co. Ltd. and Huawei Culture Co. Ltd., all reported losses for 2018, according to their annual reports.

However, in contrast to the content providers' significant slump, online streaming platforms, which provide the industry with a broader sales channel, are expanding.

According to a report released in March, 382 domestic series premiered in China in 2018 with those that were streamed only online accounting for more than two thirds of the total. Compared to 2017, Web dramas increased by more than 23 percent.

A turnaround

With the flourishing of Web dramas, the market has grown, while film and TV companies that used to control it have gradually lost ground. Currently, leading online streaming platforms like iQiyi, Tencent Video and Youku Tudou have all reduced purchases from traditional content providers and instead have invested heavily in producing their own original programs.

This kind of change has bid farewell to the early explosive growth of the TV drama industry and ushered in the current more stable development. The market is becoming more rule-based, evidenced by the reshaping of the industry under adjusted policies and the reallocation of capital across different platforms, according to the report.

"The decline of the TV drama industry is attributable to a variety of problems after years of high-speed development, such as the overreliance on big-name stars and hot IP (intellectual property) resources," Zhou Chen, an industry analyst, told state broadcaster China Central Television. IP resources usually refer to popular online IP-protected products such as novels, games or even songs that can be developed into a potentially successful feature-length films or TV series.

"Due to the implementation of a cap on movie and TV star fees and the low viewership of many series adapted from popular IP resources, the original mode no longer fits the industrial value chain and needs to be reformed," Zhou added.

His remarks were echoed by Yin Hong, Vice President of the China Literature and Art Critics Association, who warned that some series based on previously popular storylines will not be broadcast on major platforms because they are expected to not be well-received in the changing market.

In addition, the industry needs to adapt itself to the changes in tax policies, the industrial structure and the capital market, as well as the impact of the payment cap for stars, according to Yin.

Since last year, authorities have improved the rules and regulations concerning the TV drama industry. At the beginning of 2019, the National Radio and Television Administration made it clear that the same quality standards are applied to TV dramas and other artistic programs that are aired on TV stations or streamed by online platforms.

Online platforms

Chen Rui, Chairman of Bilibili, a popular Chinese video-sharing site, said there is a clear difference in the demand for cultural products between young people and their parents' generation, explaining that new-generation consumers are actually much more willing to pay for the entertainment content they really appreciate. Bilibili boasts the largest group of young Chinese anime, comics and gaming fans.

As of December 2018, the online video audience in China was 612 million, a year-on-year increase of 5.8 percent, while the number of mobile video users was 589 million, up 7.5 percent over the previous year. Although the growth rate has slowed down, statistics showed an overall upward trend. For example, iQiyi, with more than 87 million subscribers by the end of last year, had total revenue of 10.6 billion yuan ($1.58 billion), up 72 percent year on year.

As a result, content creation is now in a state of adjustment. Online streaming platforms are providing more exclusive dramas for their continuously growing number of subscribers. According to statistics quoted by China Business News, Web dramas accounted for 64 percent of total drama series made in China in 2018, at 323 or an increase of 9 percent over 2017.

Xue Yongfeng, an analyst at Beijing-based Analysys, an Internet consultancy, said previously, Internet users mainly paid for real-life items, but now they're willing to pay for virtual online content products as well.

Online streaming platforms will continue to strengthen their participation in content production amid their increasing dominance of the industry. Film and TV companies can further embed in the industrial chain for more opportunities, Zhou said.

A visitor stops by the Chinese booth during the 2019 Cannes International Series Festival in France on April 8 (XINHUA)

Content-oriented

As part of the content-based creative industry, blind pursuit of profits at the cost of quality will only lead to fake prosperity and eventually undermine the sustainability of the TV drama industry. Luckily, industry insiders have realized this over the past few years, according to Sun Zhonghuai, CEO of Shanghai-based Tencent Penguin Pictures, a film distributor and production company owned by Internet giant Tencent, at a recent industry forum.

Sun said he believes that the inflated capital of some film and TV companies also led to the current predicament, but the overall development of the industry is still healthy. For example, online streaming platforms' revenue from subscription fees and advertising is steadily growing, while their investment in content production is also increasing accordingly.

You Haiyang, an official with the Shanghai Municipal Administration of Culture and Tourism, said, "In recent years, especially since 2018, there have been some changes in the online audio and video market, which has become more rational. The content is increasingly being valued with a continuous improvement in quality. At the same time, the themes of TV dramas tend to be more diversified to meet the different needs of the audience."

No matter who dominates the industry, the content and the needs of the audience should always be its orientation, according to industry insiders.

"In the process of exploring the mode, type and differentiation of content, what we need to concentrate on is to never disregard our audience or lower the production level, but instead to present good content with better techniques and skills," said Hou Hongliang, CEO of Daylight Entertainment Co. Ltd., while attending the 2019 iQiyi World Conference, an annual summit to share innovative ideas and opportunities in the Chinese entertainment industry.

Copyedited by Rebeca Toledo

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