The notice, issued Thursday by the State Administration of Radio, Film and Television, said an investigation of Chinese online audio-visual service providers conducted between December 20 and February 20 found five companies that were streaming video without content licenses, and that dozens of others had hosted illegal content.
Separately, references to the violent protests going on around China in the wake of the recent violence in Tibet have been noticeably absent from Chinese websites, including China's three leading online video sites.
Although it has been covered by China's national state-run broadcaster China Central Television and state-run Xinhua News Agency, discussions about the unrest in Tibet on China's popular internet forums have been removed as quickly as within minutes of being posted by internet companies.
This latest development in the government's effort to regulate online video reasserts Beijing's desire to control the internet. It also confirmed recent speculation about an imminent clampdown on the online video industry - which has collectively raised tens of millions of dollars of venture capital and drawn hundreds of millions of viewers.
In the past few months, regulators issued new requirements that all video-streaming websites be owned or controlled by the government, except for existing privately owned video sites that could prove their content was in compliance with government regulations.
The closely held start-ups, meanwhile, have been scrambling to prove themselves. "We received a warning, and we're always working to upgrade our filtering system, to catch things that need to be caught," said Dan Brody, Tudou's vice president of business development, who wouldn't disclose the specific reason for the warning. The clampdown "creates a more stable regulatory environment for the industry including advertisers, copyright holders, investors, everyone."
Tudou's chief competitors, Youku.com and 56.com, were not mentioned in Thursday's notice, though their fates are also uncertain until official licenses for private online video sites are given.
Increasing numbers of China's population of internet users - which by some estimates is now the world's largest - are watching online video. According to government researcher China internet Network Information Center, 76.9 per cent of internet users in China watched online video in 2007. But with low rates of advertising spending on online video, compared with other forms of online advertising, and the high cost of operating such a website, many local online video companies have yet to break even.
China's government controls internet content by periodically blocking and unblocking foreign websites, including Google's YouTube and Wikimedia Foundation's Wikipedia, though these blocks are largely unnoticed by China's internet users, which may have exceeded 225 million this month.
Local internet companies, including web portals, search engines and online video websites, employ entire teams to filter content for pornography and other banned subject matter, including the Falun Gong spiritual group, so they may keep the internet content licenses required to operate in China. Companies say that usually, the vast majority of illegal content caught by site monitors is pornographic.
Chinese companies have said their content filtering systems aren't very different than those used by companies outside China. YouTube, for example, removes videos that aren't in compliance with their user agreement, which prohibits videos of drug abuse and gratuitous violence, among other things.
But in China, the consequences of letting the wrong content slip through filters could cost internet companies the legal right to run their businesses, especially now that there is tighter regulation. According to Beijing-based technology research firm BDA China, eight online video sites alone have raised $US190 million in venture capital since 2005.
Still, Victor Koo, chief executive of Youku, says the clampdown by regulators has given positive direction to the already-consolidating industry. "In a way, it (the latest notice from regulators) has created more transparency in terms of the development of the business," Mr Koo said. The State Administration of Radio, Film and Television "is trying to show a very clear direction about what is right and what is wrong. They are paving the road for web sites to get approval."
Meanwhile, a week after the violence erupted in Lhasa, the Chinese government stepped up its manhunt for protesters, as thousands of troops converged on foot, trucks and helicopters to Tibetan areas of western China, according to the Associated Press. The violence is the biggest challenge to Chinese rule of Tibet in more than two decades.
The violence in Lhasa has sparked unrest in neighbouring provinces and warnings from Beijing for tourists and foreign journalists to stay away.
by Loretta Chao; Sue Feng and Kersten Zhang contributed to this report.
Wall Street Journal; March 24, 2008
The Wall Street Journal
