Even with 7.5% Market Penetration Don’t Call Bilibili a “Netflix-of-China”
Most of my articles are geared towards important trends or companies that should be watched by anyone in the China Culture & Entertainment Industries periphery. This is one of those times.
Many times before I have been compelled to create a post due simple to the fact that there is an underlying misconception or factually wrong statement in regards to these industries in China.
Since iQiyi listed on the NASDAQ earlier this year every market watch outlet has been referring to it as “The Netflix of China”, not a factually misleading statement but one that shows these pundits do not fully understand how to represent the streaming and platform markets to their, readers or clients.
One thing that should be noted is that iQiyi is not only only “Netflix of China” in the game, Tencent Video (the content platform which recently dethroned iQiyi in terms of “paid subscribers”) and Youku-Tudou hold major shares of the streaming market. A market that has 76% penetration in China — though it should be noted that mostly this is due to free-to-view model that all platforms offer.
Out of the top 5 platforms in China Tencent and iQiyi both control over 45% of the market, with Youku holding just above 30%, and Bilibili holding 7.5% and Mango TV 7%.
Four of these streaming platforms could be referred to as a “Netflix of China” with the exception of one; Bilibili.
Bilibili is the leading platform for Chinese ACGN content — Chinese Anime / Manhua Comics / Games / Freemium Light Novels, platform that is more akin to Crunchyroll. The eighth largest streaming platform in the U.S., but is never mentioned as a Netflix competitor, though Netflix is mentioned many times recently as a competitor to Crunchyroll. In terms of their anime acquisitions.
When one is referring to a competitor of Netflix, Hulu or Amazon Prime come to mind, not Crunchyroll. A dedicated Japanese anime streaming content meets social media platform.
In recent weeks there have been several pundits discussing iQiyi’s numbers of user growth, along with growth across the entire OTT and platform industries including those of Tencent.
It is a fact that live-streaming and other avenues, such as Tencent’s own WeChat mini-games/programs, there are eyeballs moving away from traditional OTT platforms in China. Though this is not something to worry, and one that offers multiple potentials for those who are aware of the changing landscape that is China’s Culture Industries.
When someone is looking for live-streaming content of gamers, no one thinks of going to Netflix for this content. Viewers go to platforms like Steam for live-feeds, or to YouTube for uploaded videos of gamers playing / commentating on the favorite or choice game of the Viewer.
The same goes for China; Huya the live-streaming gaming platform has seen exponential grown in recent months, and like Bilibili it is backed but not controlled by Tencent Holdings.
Neither of these platforms should be considered a Netflix-of-China equivalent, that simplified “title” should be reserved for the OTT services of Tencent Video, Baidu’s iQiyi, or Alibaba’s Youku-Tudou.
In the overall “Content Wars” it could be argued, and has, that Huya and Bilibili are taking eyeballs away from the major streaming platforms, but it is not due to them being direct competitors. It is all about, the viewer has X amount of money to spend on content and subscription prices for multiple platforms goes beyond X. Leading the viewer to choose platform A over platform B in their subscription.
Most of this is due to which demographic the viewer belongs to in China, the younger the viewer, especially Gen Z, the more likely they will choose Bilibili or Huya over one of the major players. Until they have a larger disposable income to purchase all three, or more.
In its recent disclosure, Bilibili beat out Wall Streets projections by nearly $10MMUSD, a commonality among ACGN projections. The total market was project to reach $30BnUSD in 2016 but ended up reaching $38Bn by the end of that year, while hitting $56Bn in 2017.
A simple reason for this is ACGN’s demographic, Chinese Gen Z who are between the ages of 17 to 24 years old with the majority of them closer to 17 years of age than 24. Meaning that it is difficult to track their “disposable incomes” as they do not necessarily have any on their own.
Wall Street analyst also may face a cultural barrier in the fact that some, if not many, may not know that your average Chinese college student has more spending money than your American one.
A cultural barrier with one key difference; most American students work during college, to some degree, but this is not a commonality among Chinese.
The Chinese social dynamic of filial hierarchy influences the way Chinese parents provide money to their kids through college, along with other dynamics such as the intense pressure Chinese students face in high school to achieve high marks on the Gao Kao. AKA the Chinese College Entrance Exam — by far, not the ACT / SAT equivalent of China — a poor score on the Gao Kao has resulted in many suicides in China, and is a problem unto itself.
Once a Chinese student has reached college level it is common for parents to give their college age kids, if they can afford it (another dynamic that I will not get into), a disposable income of their own to spend on things of enjoyment. Going to eat hotpot, drinking beer with your friends, KTV, taking trips in China and abroad (usually happens towards the end of college or just after, before joining a company to work 6/7 days a week), or spend it on cosplay to attend Bilibili Link.
Bilibili Macro Link is one of the largest fan cons in China, with over 100K attendees in 2017, and it highlights the alternative forms of revenue streams that the platform has to offer. Differing it from the likes of iQiyi or Tencent Video.
Like Crunchyroll which has brought in over $100MMUSD in revenue streams for Anime studios in Japan, Bilibili operates on revenue streams that go beyond paid subscription and ad sources. Selling merchandising and other licensed commodities for ACGN products, and it is the G in ACGN that propelled Bilibili beyond Wall Streets first half projections.
Gaming has become a growing aspect of Bilibili (traditionally games that have an association to anime, manga, or Manhua comics) and will continue to be one that takes Bilibili in a leading direction of indirect competition with the other “Netflix of China”.
A market penetration of 7.5% is a strong one, comparably so in the fact that Bilibili’s demographics are the most sticky in terms of devotion to the platform. These numbers and revenue stream will continue to grow across the board, but referring to Bilibili as a “Netflix of China” underscores the potential of one of the most interesting platforms in the Middle Kingdom.
Originally published on Sept. 27th on LinkedIn.
Beyond ACGN (二次元) Ryan specializes in China Film & Entertainment, and their cross-pollination with Chinese Entertainment-tech industries.
Ryan has direct Executive Consulting experience with partners in a range of entertainment & media fields in; India, Norway, China, Africa; Malawi and Kenya, and the United Arab Eremites; Sharjah and Dubai.
If you liked what you read please — Follow & Share.
For Speaking Engagements or Consulting Please Contact Directly.