Speaking at the same event, Youku president Fan Luyuan said the three main providers of long-form video content were in a difficult situation.
“When can [we] make a profit? Judging from the current environment, it would be delusional to say that it can be expected soon.”
Youku is owned by Alibaba Group Holding, parent company of the South China Morning Post.
Tencent Video vice-president Sun Huaizhong took it a step further by equating short videos with “pig feed”, saying such content, which is often vulgar and lowbrow, is having a negative impact on users.
The criticism prompted heated pushback from Douyin owner ByteDance, which said Sun’s comments were “extremely arrogant and unfair”.
The complaints from the streaming platforms have got the attention of China’s copyright authorities.
Last month, China’s National Copyright Administration said it would intensify its scrutiny of such copyright infringements, following a public call by more than 70 domestic film and TV companies and more than 500 film industry workers to end the practise of remaking long-form content into short video clips.
The administration said it would order short video platforms to delete any content found to be in breach of the copyright rules.
China’s copyright law, like similar laws in many Western countries, allows people to quote another published work in one’s own work for the purpose of comment or education.
But most of the user-generated short videos made from movie and TV clips do not contain any commentary or added value, so they are considered copies of the original works and therefore violate the copyright law, said Juanjuan Pan, a partner at Deheng Law Offices.
Under China’s current legal framework, platforms are only responsible for removing works after they have been notified of violations, and the vast amount of user-generated content makes it difficult for copyright holders to defend their rights.
A scene from Game Of Thrones, a popular show in China. Photo: Handout
Kuaishou and Chinese video-sharing website Bilibili did not immediately respond to requests for comment.
In a statement to the Post, a ByteDance spokeswoman said the company is committed to copyright protection and is aware of potential instances of copyright infringement. She said the company has mechanisms in place to address such issues and will take down problematic content upon notification.
The complaints from China’s major movie and TV streaming platforms come at a time when they are increasingly losing out to short-video apps in the fight for user attention. Research published by Guosen Securities in May last year found that 45.1 per cent of those surveyed said they spent less time on movie and TV streaming platforms because they preferred short videos.
The trend is also reflected in valuations of the companies. Nasdaq-listed iQiyi’s market cap was US$11.2 billion on June 9, about one-fourth that of Bilibili, also traded on the Nasdaq, whose market cap is US$41.4 billion. Hong Kong-listed Kuaishou is valued at US$107.6 billion.
Profits have also been elusive. While financial reports for Tencent Video and Youku are not available because they are not publicly listed, iQiyi reported a 1 billion yuan (US$154.8 million) loss in the first quarter of this year, though that narrowed from the same period a year ago when it posted a 2.2 billion yuan loss.
Some analysts argue that it is not fair to blame user-generated clips for the poor performance of long-form video platforms.
“These infractions are certainly not the main reason for their inability to turn a profit,” said Carlton Lai, equity research director at Daiwa Capital Markets. “PGC platforms struggled to turn a profit long before short-video platforms became popular.”
Rather, he said the “inherent business models and competitive market dynamics” of the movie and TV platforms have contributed to their losses.
For example, the high cost of producing original content is a drain on profitability, and expensive shows do not necessarily equate to “hit” shows, he explained.
“It ultimately boils down to who can win and retain users. User acquisition costs for PGC platforms tend to be much higher than [user-generated content, UGC] platforms,” he said. “In the past, this was compensated by the vast difference in content quality, but nowadays, this gap has narrowed and some UGC content has been effective in drawing and keeping user time spent.”
Another problem is the disparity between cost of creating long-form content and subscription fees.
“The path for PGC companies is very unclear, and I believe they will need to increase subscription fees and try and call for respect of copyright and put pressure on short videos,” said Morningstar’s Tam.