Recently, the three biggest long-video platform in China ended the advance-on demand mechanism that has existed for nearly 2 years. The termination decision was made under the influence of government agencies. Advance-on demand is a kind of charging model based on the membership system, where the platform member has to pay extra fees to watch the latest episodes. Before this mode arises, once the audience topped up for a membership, he/she can enjoy the whole content, including series, movies and variety shows. In 2019, Tencent Video and iQiyi launched an advanced on-demand policy in the hit drama “Celebrating Yu Nian”, thus causing a lot of controversy.
The long-video incumbents do benefit from this strategy of discrimination. For example, in the fourth quarter of 2019, “Qing Yu Nian” was launched. In this quarter, membership income reached 3.86 billion yuan, the highest among the four quarters of the year, which was 3.72 billion yuan from the previous quarter, an increase of 140 million yuan, while the number of members actually only increased from the previous quarter. 1 million, which means that the per capita spending of members has risen significantly.
It’s not a new phenomenon for digital products. As versioning and price discrimination are quite common in IT industry, many incumbents rely their profit proliferation on these strategies. For instance, MS Office has several versions of product to satisfy different layers of customers, and Tencent QQ provide clean interfaces to its members without advertisements. But these long-video platforms have obviously gone too far. Even if we can rationalize the price discrimination phenomenon of the producers who do provide different functions or services, the advance-on demand mode is still suspected of deceiving the platform members.
Existence is reasonable. For these platforms, it’s compelling to use this strategy. As the revenue, cash reserve and user growth status are pessimistic, the long-video platforms have to find out new ways of gaining profit. In such a stock market, one of the not many ways is to continue to harvest among existing members. A new type of version, advance-on then came out.
Like Chinese platforms, western long-video platforms such as Netflix and HBO have similar membership mechanism, but they don’t annoy their customers by further versioning. One of the reasons is that for Chinese cultural industry, factors such as audience’s aesthetic level and language closure decide the reality that Chinese literacy works can’t occupy overseas market, leading to the revenue disadvantage of Chinese video platforms, and the disadvantage in turn lowered the standard of Chinese literary works. Chinese long-video platforms have a long way to go to make profits more easily, but certainly not by betraying their customers.
