Analysis: "Housewives" heads to China as Hollywood inks deals

Mon Aug 8, 2011 12:16am EDT
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By Melanie Lee

SHANGHAI (Reuters) - Hollywood studios are set to break into China's massive Internet market as domestic video sites scramble to screen U.S. movies and dramas on their digital platforms, a move which could also curb rampant piracy.

China's Youku's and Sohu's online video platforms have already cut deals with Disney and CBS Corporation to stream U.S. drama serials such as "Desperate Housewives," "Grey's Anatomy" and "Gossip Girl," and more such deals are expected.

This represents a lifeline for Hollywood studios who have struggled to make money in China due to persistent piracy and the country's quota system that limits the number of foreign movies screened in theatres to 20 per year.

"Major Hollywood studios have struggled to find a viable business model in the China market and cooperating with China's online video sites for paid viewing of their content finally gives them a way to make money here," said Mark Natkin, managing director of Beijing-based consultancy Marbridge Consulting.

China is the world's largest Internet market, with more than 450 million Internet users, and online video firms are stepping up their fight to secure a bigger piece of the market share to win advertisers.

Advertising revenue in the domestic online video market, which was virtually non-existent five years ago, is now estimated to be worth 1 billion yuan ($155 million). This is expected to grow at double-digit rate for the time being.

Online video providers such as Youku have also started pay-per-view for some movies, thus giving them a new source of revenue.

Analysts say it's still too early to assess these deals' financial impact on Hollywood studios over the longer term, but agree that this offers a long-awaited entry point for Disney and others to the world's second biggest economy.   Continued...

<p>An employee is seen through a glass wall as she walks past the logo of above the reception desk at the company's headquarters in Beijing, December 9, 2010. REUTERS/Soo Hoo Zheyang</p>