Sohu staff recently leaked a new spin-off plan for its video site SohuTV with an imminent IPO plan.

China’s video market showed some good signs recently. According to a new report by iResearch, the Chinnese Internet thinktank, in terms of monthly page views Youku(4.846b), Tudou(2.674b) and SohuTV(3.131b) won the first three places. The former two have been moving at a steady pace together, while other players are focusing on different directions. It looks like this market’s business model (ad-supported plus subscription fee) and ecosystem are gradually mature and being accepted.

 

Lower Contents Costs

Latest data from CNNIC (China Internet Network Information Center) said that the contents costs in Q2 and Q3 of this year has fallen rapidly, e.g. the price for TV plays dropped by 60% yoy. Back in 2010, hot plays could cost RMB 300,000-800,000 per episode or even higher, which was a big burden for video sites. The reduction in contents costs will definitely speed up the monetization of video sites since content costs and bandwidth are the top two cost burdens for them.

One industry insider noted that “the content war is about to end, and the chance of a price surge again is very thin. The whole market will move on to healthy competition.”

In addition, the past three years have seen a very steady increase in video sites’ ad revenues. iResearch data showed that as revenues of the whole tech industry up by 41.4%, as for video sector, the number is 74.6%. Insiders predict that some big guys may see profits earlier than they had expected.

Sohu TV IPO, A Rising Big Player

The spin-off plan for SohuTV was firstly raised in April. Recently CEO Charles Zhang said that, “currently we’re focusing on video and searching, as well as on the mobile and social trend.” The revenue sources of SohuTV include ads, copyright distribution and paid contents, which all enjoyed some growth.

Apart from ads, copyright distribution also contributed a lot to the whole revenue. As the first video site that introduced copyrighted American TV plays into China, SohuTV hosted a dedicated channel for all those plays (most of which are the hottest ones). “We want to serve the users with rich, multi-dimensional watching experiences,” said Deng Ye, CEO of Sohu Video.

Screenshot of SohuTV