In Focus … Tudou.com Raises $$$ Despite Lack of License
BEIJING --- The future of China’s most popular video sharing websites – such as Tudou.com, Youku.com and 56.com – was thrown into question by new regulations issued by the Ministry of Information Industry (MII) and State Administration of Radio, Film and Television (SARFT) on December 31 (see China Media Monitor January 2008). However, the regulations do not appear to have deterred all private investors from the sector, if the recently announced results from the popular Tudou.com site’s fourth round of funding are any indication.
The controversial regulations require all organizations to obtain two licenses to operate video sharing websites, but they originally said only state-owned entities or state-controlled companies were eligible to apply. The government later amended the regulations to allow privately-owned companies to apply if they were operating before the regulations came into effect on January 31.
In the uncertain atmosphere that existed after the new rules came into effect, several media organizations speculated that the government would use the licensing requirement as a tool to whip websites carrying objectionable content into line. Unconfirmed rumors that the government had already issued Tudou.com with a shut-down order circulated, though the website’s executives denied receiving any such order. Tudou.com and 31 other websites later received an official warning to curb their pornographic, violent and political content on March 21 (see China Media Monitor March 2008). At the same time, SARFT banned 25 websites from hosting video-sharing services in the future because they lacked government authorization and frequently broadcast prohibited content. A further eight websites received shut-down orders and 20 others received official warnings on May 20 (see New Media below).
Despite the rocky start to 2008, Tudou.com on April 28 announced it had raised a record RMB397.86 million (US$57 million) in its fourth round of investment, one week after it celebrated its third birthday. The bulk of the funding came from investors based in Europe and the US, including many who had invested in Tudou.com in previous funding rounds. The result is considered likely to be the greatest single sum any Chinese pure play company has ever raised in a single round of funding. It brings the total funding the company has raised over the past 3 years to RMB593.3 million (US$85 million).
In the press release announcing the result, Tudou.com said it expects the sum will support the company’s expansion plans for a significant amount of time going forward. It also announced that it is rolling out H.264 high definition videos across the entire site to satisfy the needs of the more than 10 million unique users who visit it every day.
Now that it’s all cashed up, Tudou.com still faces the challenge of obtaining the relevant licenses from the government. To expedite the process, the website has started implementing a system to review all the content it hosts every 24-hour hours and remove any banned content. So far, five privately-owned video-sharing websites have obtained licenses, including joy.cn, 51tv.net and netandtv.com. Time will only tell whether Tudou.com can join this exclusive list.