Paid contents in China to generate $121 billion by 2022

Aug.10 (NBD) -- More Chinese consumers will turn to paid contents, which is expected to reap as much as 829 billion yuan (121.2 billion U.S. dollars) by 2022 against the current 444 billion yuan (64.9 billion U.S. dollars), said UBS Securities at a meeting concerning the development of paid contents in China Thursday.

Ninety percent of the American people were not willing to pay for contents, a U.S. survey conducted in 1972 shows. However, the paid content industry started to take off in the country around 1980. The same thing will happen in China soon, said Liu Zhijing, an analyst of China media and internet industry at UBS Securities.

According to the financial statement of iQiyi (NASDAQ: IQ), it has had a membership of 67.1 million as of the second quarter ended June 30 with a year-over-year increase of 75 percent. During the same period, membership services garnered 2.5 billion yuan (365.5 million U.S. dollars), up 66 percent year on year. Tencent (00700.HK)'s data released early this year shows its paid membership has reached 62.59 million as of February 28.

It is surprised to see such achievements in mere 3 years since the debut of paid contents. But it is just the beginning, Liu said. Investors may worry that demographical dividend of China's internet industry is waning, but opportunity is growing in the paid contents market.

China is now standing at an inflection point, just like what the American media faced in the 1980s. UBS Securities predicted that online video will see the highest growth.

According to Liu, China's online video industry will see a compound annual growth rate of 28 percent from 2018 to 2022, with the market size to hit 242 billion yuan (35.4 billion U.S. dollars) at that time. The number of paid subscribers of online videos is expected to grow by 1.28 times to 223 million.

Besides, almost half users will turn to paid contents in the media market by 2022, higher than the 34 percent in 2017. This will bring opportunities to content producers listed in the A-share market, as their valuation is far lower than foreign counterparts as well as overseas internet companies.

Currently, China's top 3 online video platforms - iQiyi, Youku and Tencent Video - haven't been profitable yet. Could the pay-based model be their way to turn profitable?

However, there is still a long way for China's paid content industry to go.

The membership fee of the top 3 domestic video platforms is 198 yuan (28.9 U.S. dollars) on average, while American media services provider Netflix's membership fee is about 629 yuan (92.0 U.S. dollars) and Cable News Network's is around 1,000 U.S. dollars.