China has overtaken the UK as the second largest spender globally on TV content, according to research from IHS Market. High spending on TV content from China’s digital giants has driven growth of the Chinese market, and these tech companies are expected to overtake traditional TV broadcasters this year if their high spending continues.
TV programming expenditures in China last year reached 73 billion yuan ($10.9 billion) according to IHS Markit’s data, beating out the UK’s content spend of $10.0 billion. While this bumps China up to second place globally, it still lags far behind the US, which overall spent $58.3 billion last year.
The research perhaps says more about the rapid growth of spending in China than it does about the UK’s spending on TV content. However the UK’s spend has retracted slightly in recent years, from $10.7 billion in 2016, and the slip from second place could be seen as somewhat ominous given the challenges facing Britain’s TV sector. UK communications regulator Ofcom recently warned British TV companies, and public sector broadcasters in particular, that they may need to invest more heavily in UK-made content in order to stay competitive. And as VAN has previously reported, a potential post-Brexit broadcaster exodus could see more investment directed away from the UK’s TV industry.
China’s big three tech companies Baidu, Alibaba and Tencent have primarily driven this increase in spending as they’ve all invested heavily in content production and acquisition for their respective digital video platforms: iQiyi, Youku Tudou and Tencent Video. Overall content expenditure from digital players has shot up from under 5 billion yuan in 2013 to 30 billion yuan last year, and is expected to reach just under 50 billion yuan this year. Spending by TV broadcaster meanwhile rose from 30 billion yuan in 2013 to 43 billion yuan last year.
This investment from the tech companies has started to take its toll on China’s tradition broadcasters, with their revenue having peaked in 2015. “As digital entertainment viewership gains traction, advertisers are gradually moving more of their budgets to digital platforms,” said IHS Markit senior analyst Kia Ling Teoh. “We expect online companies to overtake TV broadcaster spending in 2018, if the content creation spree persists.”
High spending is driving up the price on content, sparking something of a content war which mirrors that of Western companies like Netflix, Amazon and Apple. One key difference is that Chinese video platforms “still rely substantially on advertising and sponsorship,” according to Teoh. Teoh warns that if the cost of producing and acquiring content continues to rise as it has done so far, aggressive investment like we’ve seen so far will become unsustainable.