connectedtvLast week Xiaomi lost lawsuit against LeTV over online video rights. It seems it has something to do with the fact that the two are direct competitors in smart TV and set-top boxes, but the dispute over video content aroused much discussion in China.

LeTV accused Xiaomi of offering videos in Xiaomi Box, a set-top box, the former has exclusive rights. But Xiaomi, the maker of consumer electronics products including smart TV and set-top box, doesn’t provide video content directly but through third-party apps or content provider. The aforementioned videos were from the video platform ICNTV, an authorized online video source.

Chinese set-top boxes and smart TVs, actually, are not allowed to provide video content they have or they’d like to provide with. SARFT, the state ministry for television, radio, film and publication, only allows seven organizations to provide over-the-top video content and another seven to provide videos for connected TV or set-top boxes. All of the 14 organizations, such as ICNTV, are state-backed and overseen by SARFT.

In China what can be shown on the TV screen has been strictly controlled by SARFT. When connected TV trend emerged in China, unlike before that they could order TV stations to stop delivering certain content whenever they want to, smart TVs and set-top boxes stream videos from online video sites whose contents are not under the supervision of SARFT.

Thus SARFT created a new category of license requiring all the connected devices that are able to display video content on TV screen to provide content from the 14 licensees.

Xiaomi learned its first lesson shortly after the launch of Xiaomi Box, which, like Xiaomi smartphone and most connected devices, includes several pre-installed video apps which are popular ones in China but didn’t include any licensees granted by SARFT.

Now offering content from authorized source brought Xiaomi trouble again. It is reported that the illegitimate content delivered through the Xiaomi Box was from CNTV. What’s confusing is LeTV didn’t sue ICNTV but Xiaomi. What makes it more confusing is the court ruled that Xiaomi Box infringed the copyright.

The lawyer representing LeTV said the problem is Xiaomi shares revenues from ICNTV content, as reported by Yicai.

In order to control the TV screen like before, SARFT released an operating system for smart TV, named TVOS, at the end of 2013 and would issue a notice (in Chinese) last month asking all cable companies across China to have all the connected TVs they purchase or install for consumers loaded with the system.