This website requires JavaScript.
Analysis

Bytedance Bets on Longform Content; To Produce Own Shows

Aug 31, 2018 by A. Alfaro
Bytedance Bets on Longform Content; To Produce Own Shows

After months of rumours, the media platform ByteDance, previously known as Toutiao or Jinritoutiao, has confirmed its intentions to produce its own audiovisual content.

Xigua (Watermelon) Video, one of ByteDance's subsidiary video apps, declared recently that it will invest USD 587 million within the next year to produce its own content. Xigua's first project will be a new reality talent show in cooperation with another company, Yinhekuyu Media.

This is an attempt at exploiting the market of long videos which is dominated by three companies: Youku, iQiyi and Tencent Video.

This decision comes as a surprise to some people within the industry. Since inception, ByteDance(Jinritoutiao or Toutiao) has been associated with short and rapidly spread content through its many video applications.

Also, 2018 does not seem the best time to enter this market. According to the big data provider QuestMobile, consumption of long videos (series, movies or TV programs) has decreased last year. Long videos represented 10.9% of the total consumption time in 2017. This year, the figure has dropped to 9.2%.

Why has Bytdance decided to enter the market now?

For its first production, ByteDance has chosen an online reality-talent show. The production will take between 2-4 months and the company has started to hire people. For ByteDance, this is a big investment and is considered to be a strategic move.

Xigua, Douyin (Tik Tok) and Huoshan are the three largest video platforms in ByteDance’s ecosystem. But after Tik Tok’s explosive growth, Xigua has not received the same attention from ByteDance, which has focused more on developing Tik Tok both in China and internationally.

According to Questmobile, Xigua’s daily active users grew by 1.5% in the first quarter of 2018. Although it ranks in the top 10 in daily active user (DAU) growth, it is far from its counterparts, Huoshan and Tik Tok, which grew 2.5% and 8.5% respectively. Tik Tok, thanks to its filters and video effects and its focus on interactive content, is very popular among young people.

Xigua is a more traditional video application and it can potentially attract a larger consumer group. This is the reason why Xigua chose an online reality-talent show for its first production. Reality-talent shows can potentially attract many different kinds of consumer groups and are the most suitable choice for a first production that wants to attract many consumers’ attention.

If we take a look at the three largest long video platforms, in January, the shows were most popular among users that had just installed the application. About 14.7% of new Youku users in January chose to first watch “Joyful Comedians”. About 13.9% of iQiyi users on January watched “Idol Producers” and 12.2% of Tencent Video’s new users on January watched “The Negotiator”.

Not only that, it is becoming more and more common for these shows to be accessible only through an app and not on TV anymore. According to QuestMobile, users from fourth-tier cities and below tend to prefer to watch these shows on their phones. Although ByteDance is also focused on its international expansion, mainly through Tik Tok, it also wants to penetrate deeper in the domestic market, where there is still a large room for growth. But fourth-tier cities have its own challenges.

A former employee at ByteDance consulted by 36Kr points at copyright problems as one of ByteDance’s main challenges. “In prefecture-level cities, content about local events tends to be the most popular, but ByteDance does not have the rights for the videos produced by local stations,” the employee said.

In the past, ByteDance (Toutiao) faced criticisms and attacks from local media for breaking copyrights, but after its rapid growth, ByteDance has decided to be more cautious and respect copyright laws.

“But ByteDance cannot buy the broadcasting rights from every small local station in China”, says the former employee.

As for reality-talent shows, there is a similar situation. Despite its potential to attract new users, Xigua risks legal actions when shows produced by others are uploaded on its platform. Sometimes, users upload whole shows as multiple short videos to circumvent copyright protection. However, in this competitive industry, copyright awareness is rising and platforms are becoming more responsible. On Xigua’s search engine, it is already difficult to find whole reality-talent shows produced by third-parties.

ByteDance’s decision to further penetrate in fourth-tier cities and beyond also has financial reasons. As opposed to people from first and second-tier cities who have more resources and education, people from fourth-tier cities are more likely to be influenced by advertising. This could become a valuable income source for the company.

Apart from penetrating deeper in Chinese society, Xigua could play another important role for ByteDance, it could help to establish an account system. Both in China and abroad, big companies are producing content that revolves around a membership. Netflix, iQiyi, and Amazon had this goal when they established their membership accounts. Since last year, ByteDance has been trying to build up its membership environment. “As opposed to Tik Tok, which has a strong social element and log in into one’s account seems more natural, Xigua does not have that social media DNA. As a result, many of its users do not log in, they just navigate the videos”, a Xigua employee declared to 36Kr. Converting those “outsiders” into registered users is one of Xigua’s main challenges.

In order to better establish an account system, ByteDance plans to use social media. The company developed a smart social media product: Mini Toutiao (Toutiao means headline). This product focuses on using algorithms to push content and creators to users. However, it is still based on traffic distribution thinking and it has failed to encourage users to create social products. Mini Toutiao also lacks the experience and the communication chain of Weibo (the Chinese equivalent to Twitter). As for now, Mini Toutiao has not reached expectations. Despite this setback, ByteDance is still pursuing a breakthrough innovation in social media.

ByteDance’s philosophy is thus: a single company can change a whole industry on its own. ByteDance’s confidence to start producing its own content comes from its ability to spread content through its application ecosystem. This ability to control and change distribution methods and channels could really influence Internet content and traditional providers within the next years.

Xigua could follow Tik Tok’s path: thanks to its rapid user growth and high adaptability, Tik Tok has become one of the main contenders in the battle for Internet traffic. Xigua could potentially achieve in the long video market the success that Tik Tok achieved in the short video market. According to an investor in the audiovisual market consulted by 36Kr, “ByteDance would not enter a market if they thought they cannot conquer it”.

According to an internal research by ByteDance, about 14.5%, 30.7% and 29.99% of users of Youku, iQiyi and Tencent Video, respectively, also use ByteDance (Toutiao). ByteDance’s decision will also intensify its battle with Tencent.

Tencent and ByteDance have had conflicts in the news industry and now they will have to fight in a new field. For its first production, ByteDance will cooperate with Yinhekuyu Media, which is financially backed by Alibaba, Tencent’s arch-rival.

ByteDance is slowly building a media empire, entering new territories and increasing its value. In order to achieve that, ByteDance will have to overcome some challenges and face powerful competitors.

A. Alfaro

A. Alfaro is a Beijing-based freelance reporter. He focuses on China's politics, culture and society. He can be reached at varofaro@gmail.com. 

Follow A. Alfaro