CHINA ONLINE VIDEO STUDY 2012

1

Sources: CNNIC, eMarketer, Informa, Media Partners Asia (MPA)

KEY INFORMATION

Socioeconomic (MPA)Statistic

Population (mil.) 1,348.1Households (mil.) 454.4GDP (USD tril.) 6.99GDP per capita (USD) 5,183.9

Television (MPA)

TV Households (mil.) 438.5TV Penetration (%) 96.5Pay TV Subs (incl. multiple platforms) (mil.) 202.9Cable (Analog) (mil.) 89.3Cable (Digital) (mil.) 112.2IPTV (mil.) 13.6Pay TV Subs / TV HH (%) 46.3Pay TV ARPU / Month (USD) 3.4

Internet and Broadband (CNNIC, eMarketer, MPA)

Internet users (mil.) 537.6Online video users (mil.) 350.0Broadband subs (HHs) (mil.) 168.3 Broadband subs / Total Household (%) 39.4%Broadband ARPU / Month (USD) 9.3

Mobile (CNNIC, eMarketer)

Mobile phone users (mil.) 880.4Mobile penetration (%) 65.5Mobile 3G subscriber (mil.) 152.1Mobile video users (mil.) 107.6

2

OBJECTIVES

A CONSUMER POINT-OF-VIEW STUDY

• To gauge the usage habits of long-form videos online, especially American/British movies, TV series or variety shows

• To comprehend online video viewers’ perception towards different video websites

• To explore viewers’ interest and willingness to pay for online video services for American/British movies/programmes

• To have preliminary understanding of the amount viewers are willing to pay for different service packages

3

METHODOLOGY – 2 STAGES APPROACHPhase 1 - Ipsos Media Atlas China (MAC)A Large-scale annual syndicated survey in China, revealing lifestyles, spending, digital & media habits, values and attitudes, branding

Sample definition: 1. People aged 15-64 years old

Phase 2 – Online Panel StudyUnderstands online video viewers usage habits and attitudes towards long form video consumption, especially on English content

Sample Definition: 2. People aged 20-39, and 3. Have watched any long form content online for 30 mins+ in past 7 days, and 4. Have watched any American/British long form content on any platforms in past 30

days

Sample Achieved: 300 sample in each city

BEIJING, SHANGHAI, TIANJIN and WUHAN4 cities with significant market size and high penetration

in long-form online video consumption

4

KEY FINDINGS

5

• MULTIPLE DEVICE OWNERSHIP

• MULTIPLE SCREEN VIEWING

• WHERE ARE THE ONLINE VIEWER

• GENRE THAT INTERESTED THEM

• MOST POPULAR PORTAL

• WHAT PEOPLE LIKE/DISLIKE ABOUT THEM

• SPENDING ON MEDIA ENTERTAINMENT

• ARE THEY READY TO PAY FOR ONLINE CONTENT

DEVICE OWNERSHIPBeijing and Shanghai have higher penetration on mobile devices (Smartphone and Tablets), with Tablets ownership significantly outweighs Tianjin and Wuhan

* DVD/Blu-ray player = household ownership

98%99%99%99%

Desktop/Laptop

Shanghai

TianjinWuhan

Beijing

91%92%

85%85%

Smartphone

58%66%

49%47%

Tablet

58%59%60%53%

73%76%

77%72%

Portable Media Player

DVD/Blu-ray player*

98%99%99%99%

Desktop/Laptop

Shanghai

TianjinWuhan

Beijing

91%92%

85%85%

Smartphone

58%66%

49%47%

Tablet

58%59%60%53%

73%76%

77%72%

Portable Media Player

DVD/Blu-ray player*

6

0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 5.550%

60%

70%

80%

90%

100%

Usage % vs. Weekly Hour Spent

VIEWING ON VARIOUS DEVICESScreen size matters - Desktop computer is the dominant device for online video viewing; Tablet also has high penetration and usage, although its time spent is just half of Desktop/Laptop

7

Desktop/LaptopTablet PC

Mobile/Smartphone

Portable media player

DVD/Blu-ray DVD player

Weekly Hour Spent

99% / 13HRS

93% / 6.5HRS

77% / 4.5HRS

74% / 4.3HRS

68% / 4HRS

Using search engines for information Instant messenger Watching online videos made by other users

85.578.4

69

58.350.3

85.877.4

73.265.5

53.8

Tier 1 Tier 2

TOP ONLINE ACTIVITIESWatching long-form video is one of the top online activities (higher than UGC), tier 2 cities have higher usage rate than the tier 1 peers

Top 5 online activities in past month

8

MARKET SIZING (ONLINE VIDEO)• Tier 1 cities (except Guangzhou) have larger viewers base with Shanghai leading at 4.2M

viewers

• All Tier 2 cities with 1M+ online viewers have higher usage than Tier 1 cities. Tianjin and Wuhan were among the highest (~80%) and have a significant size of online audience base (over 2.4M)

• Among Tier 1, Shenzhen has the highest usage while a large share of population are non-local

Xi'an

Hangzhou

Chengdu

Nanjing

Guangzhou

Chongqing

Wuhan

Tianjin

Shenzhen

Beijing

Shanghai

1,205

1,207

1,410

1,621

2,193

2,378

2,422

2,655

3,278

3,332

4,204

Watched TV programme/movie online in past month - Tier 1 & 2 cities (ranked by audience size 000s)

(56%)

(55%)

(65%)

(78%)

(76%)

(67%)

(58%)

(76%)

(66%)

(62%)

(62%) Only those with 1M online video viewers are listed here

9

T1T1

T1

T1

STREAMING vs. DOWNLOADStreaming represents a large share of video viewing, consistent across four cities

Beijing Shanghai Tianjin Wuhan

64% 62% 65% 69%

36% 38% 35% 31%

Online streaming Downloaded videos

10

WEEKLY HOUR SPENT IN ONLINE VIDEO• Local TV Series/Variety Shows are the most watched content online

• American/British movies are more welcomed than local and Asian films

• American/British TV content are more popular than local movies and other Asian content (except in Tianjin people watch more local movies than English TV program)

Weekly Hour Spent Beijing Shangha

i Tianjin Wuhan Average

TV Series/Variety (Chinese) 5.1 4.8 6.1 5.6 5.4

Movies (American/British) 4.9 4.6 5.1 4.7 4.8

TV Series/ Variety (American/British)

4.5 4 3.9 4.1 4.1

Movies (Chinese) 3.9 3.7 4.8 4 4.1

TV Series/Variety (Asian) 3.4 3.7 3.7 3.1 3.5

Movies (Asian) 3 3.1 3.3 3.2 3.2

Total* 22.4 21 24.5 22.3 22.5

11

Ranked by 4 cities average

70%

79%

83%

74%

88%

69%

79%

76%

80%

91%

69%

77%

69%

75%

88%

62%

78%

79%

71%

84%

CURRENT vs. LIBRARYViewers consistently lost interest (10%+) when contents were offered in a later windows (Movies: 3 6 months / TV: current library). Tianjin and Wuhan also interested in classic hit movies

Beijing Shanghai Tianjin WuhanNew Movies

(3 months after theatrical releases)

New Movies (6 months after

theatrical releases)

Classic Hit Movies(4 years+)

New TV Episodes (current season)

Older TV Episodes (past seasons)

12

11%

4%

10% 7% 11% 16%

13% 14% 13%

6% 9% 8%

GENRE OF INTERESTComedy are the most interested genre in both movies and TV series; in the 4th place Romantic comedy also appealing to Chinese audience

Beijing

Comedy

Action

Horror

Romance/Romantic

Comedy

Comedy

Drama

Police/Crime

Romance/Romantic

Comedy

Movie

TV Series

81%

76%

72%

66%

80%

73%

70%

65%

Shanghai75%

71%

69%

64%

71%

70%

69%

61%

Tianjin80%

76%

67%

62%

79%

72%

69%

65%

Wuhan81%

72%

60%

59%

72%

65%

63%

59%

Only top 4 genres are shown here

13

China Unicom

BesTV

China Mobile

Joy.cn

BT websites

Cntv.cn

Fushion

LeTV

Sina

Ku6

Tencent

Sohu

iQiyi

PPStream

PPLive

Xunlei

Tudou

Youku

Any Video American/British

VIDEO SITE PREFERENCE (AMERICAN/BRITISH CONTENT)Youku and Tudou were the most visited video sites in China. Xunlei, PPLive, PPStream and iQiyi are also popular options. Mobile video service from mobile operator still in its infancy

14

42% 72%

35% 67%

32% 56%

28% 54%

28% 53%

24% 53%

20% 48%

17% 45%

21% 44%

18% 44%

17% 44%

20% 40%

13% 40%

20% 37%

11% 34%

10% 33%

11% 33%

18% 28%

Video Sites visited in the past 7 days (% of total online viewers)

P2P Illegal download (high in American/British content)

Mobile Video Service from Operator not popular

The 2 largest sites merged (Aug 2012)

formed Video Content Corporation – aim to reduce content licensing cost (Apr 2012)

Backed by CCTV

Most Popular

Volume & Variety of Content

Video Quality

Smoothness of

Streaming

Interface Attractivene

ss

Too much Advertising

SATISFACTION TOWARDS VIDEO SITES

15

*Full list of video portal and score charts available in full report

Watching movie at Cinema Purchase Legal DVD/VCD Pay TV channel0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Beijing Shanghai Tianjin Wuhan

MONTHLY ENTERTAINMENT SPENDINGModest spending on video entertainment in general. Tianjin viewers are more likely to spend in physical format

Monthly Median Spending (RMB)

¥ 80

¥ 60

¥ 22

¥ 30

¥ 20

¥ 40

¥ 50

¥40

16

*Online video – include pay-per-view and monthly package

¥ 44

¥30

¥ 50¥ 50¥ 52

MAXIMUM AMOUNT TO PAY FOR ENGLISH MOVIESViewers are interested in watching English movies, but only 33-42% are willing to pay. The maximum amount they are willing to pay just about the same as existing price

93%

33%

91%

42%

93%

40%

sVOD ¥ 30 ¥ 20 ¥ 30 ¥ 20

VOD ¥ 6 ¥ 5 ¥ 5 ¥ 5

VOD (48hours) ¥ 5 ¥ 3 ¥ 5 ¥ 3

17

Beijing Shanghai Tianjin Wuhan

FREE: 93%

PAID: 41%

sVOD – 200 movies with release of 3 years ago or beforeVOD – no limit in viewing timeframeVOD (48hours) – viewers are allowed to watch the movie within 48 hours upon purchase (existing model)

PAID: 36%

MAXIMUM AMOUNT TO PAY FOR ENGLISH TV SERIESInterest level in paying for TV Series is lower than paying for movies: less than 38% of viewers are ready to pay for TV Series. Monthly sVOD price is on par with movies (except in Shanghai) but price per TV episode is down to RMB 2

88%

29%

89%

38%

89%

32%

sVOD ¥ 30 ¥ 25 ¥ 30 ¥ 20

VOD ¥ 5 ¥ 3 ¥ 4 ¥ 3

VOD (48hours) ¥ 4 ¥ 2 ¥ 2 ¥ 2

sVOD – 200 hours of TV series regardless of current/library seasonVOD – no limit in viewing timeframeVOD (48hours) – viewers are allowed to watch the movie within 48 hours upon purchase (existing model)

18

Beijing Shanghai Tianjin Wuhan

FREE: 89%

23%

36%

39%

44%

71%

REASONS FOR NOT WILLING TO PAY FOR CONTENT

19

Advance Window?

Exclusivity?

Not willing to spend money on any online

video (Prefer Free Content)

Watch legal videos from other sources

(online or other media)

Not important whether the video is legal or not

Other sites have more updated content

Insecurity of online payment

15% solely want Free Content

41% of respondents are not willing to pay for American/British content (Movies: 33% / TV Series: 38%)

KEY FINDINGS

20

• TIER 2 CITIES ARE IMPORTANT with their high usage rate in online video viewing (~80% in Tianjin and Wuhan); while Tier 1 cities continue to bring in large number of online viewers

• MOBILE DEVICES ARE POPULAR: Smartphone ownership reached ~90% while tablets passed 50% (60% in Tier 1 cities). Besides PC/Laptop, people also watch online video from their tablets

• COMEDY ARE POPULAR genre among American/British movies and TV series. Action and Thrilling contents should not be omitted while Romantic Comedy is also welcomed

• YOUKU/TUDOU ARE MOST POPULAR PORTAL as they have large volume and variety of content but they are most disliked of their overwhelming volume of advertising. Audience enjoy the smoothness of streaming on Xunlei/PPStream and iQiyi is valued by their HD quality video

• DIGITAL SPENDING SURPASSED PHYISCAL with about 50% of respondents currently spending on PPV or monthly package

• 41% OF VIEWERS NOT WILLING TO PAY for online video content. Most of them just enjoy FREE content as they enjoy for many years in television. Exclusive content and advance of releasing window could possibly attract them to spend

THANK YOU