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Digital video seems to be exploding in China. Although much attention has been paid recently to the fast growth of live streaming video in the country, its subscription video-on-demand (SVOD) sector is drawing much larger audiences—and showing signs of maturing.
According to new projections from banking and financial services firm JPMorgan Chase & Co., the number of SVOD subscribers in China will hit 144.0 million this year, accounting for more than one-quarter (26.9%) of total digital video viewers.
While the number of SVOD users will still trail cable TV subscribers by a significant margin in 2017, that lead will close over the firm’s forecast period. JPMorgan Chase & Co. estimates that the ranks of SVOD subscribers will grow by double-digit rates annually, hitting 234.3 million by 2020.
Meanwhile, the number of cable TV subscribers is expected to fall, dropping from 252 million this year to 248 million by 2020.
In their early days, China’s online video platforms were often home mostly to pirated materials and user-generated content. That’s changed in recent years, as the government cracked down on illegally hosted materials, and video services began to sign licensing deals with content studios.
Now platforms like Baidu-owned iQiyi and Alibaba’s Youku Tudou are purveyors of legitimate content, and consumers in China appear to be responding favorably. JPMorgan Chase & Co. estimates that iQiyi will lead China’s SVOD market this year, with 99.1 million subscribers, an increase of more than 120% vs. 2016.
In a move underscoring just how important legitimate content has become, iQiyi inked a deal with Netflix in April to serve as the platform for the latter’s original content in China. (Netflix withdrew from the country in October 2016, citing insurmountable regulatory challenges.)
iQiyi’s hold on China’s SVOD market is not unassailable, however. JPMorgan Chase & Co. projects Tencent Video will catalog 80.6 million paying subscribers this year, with that figure rising to 172.2 million by 2020. By then, iQiyi will lead by fewer than 10 million subscribers.
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