Chinese officials confiscate pirated DVDs during a raid on shops at Nanjing, Jiangsu Province, in this Jan. 17, 2007 photo. (Photo : Getty Images)
China is tightening its grip on DVD imports that Chinese Internet companies are using to bypass government controls on showing movies and TV shows online, the Wall Street Journal reported on Monday citing insider sources.
The State Administration of Press, Publication, Radio, Film and Television (SAPPRFT), China's top media regulator, said that it will cut the number of import licenses for physical media like DVDs--currently more than 1,000 titles a year--and require importers to state whether the physical media is also going to be posted online, the report said, quoting people familiar with the new rules.
While the Chinese government limits video-streaming sites to ensure no more than 30 percent of their content comes from overseas, Internet companies have used a loophole that enables them to stream extra foreign shows online that are not counted in the quota.
When a distributor gets a government license to physically import a TV show or movie, usually in the form of DVD and Blu-ray discs, it also gains the right to post the content online, the source said.
Legal DVD sales are virtually non-existent in China, where major movies and shows are widely available through illegal downloading services and pirated disks, as well as a newer generation of video websites offering legal content.
The new rules are a major blow to China's Internet companies and Hollywood studios seeking to profit from the massive Chinese market. According to official data, more than 461 million Chinese watch video online, with Web giants Tencent and Baidu providing most of the online video content.
In 2014, SAPPRFT told Chinese video streaming sites to limit their foreign content to just 30 percent of their available offerings. At the time, foreign shows comprised more than half of the TV content of popular video sites.
The regulator also instructed video streaming companies to suspend some titles posted online under a physical import license, the Wall Street Journal reported, adding that the companies are also required to submit the titles to the agency for another round of censorship.
Despite the crackdown, China's Internet giants are investing more money into video streaming to reach a growing online audience. In October, Alibaba Group Holding offered to pay up to $4.6 billion for a stake in major video streaming site Yukou Tudou, a move that would give the e-commerce powerhouse access to more than half a billion online video users.
Hollywood studios also see major profits in China as video streaming sites compete to buy and stream legitimate content. Baidu's iQiyi.com has recently entered into an online streaming deal with Universal Studios for library titles and with Paramount Pictures for online broadcast rights of 800 films.
Earlier this month, Tencent struck a deal with HBO to offer content including "Game of Thrones," and recently acquired from Metro-Goldwyn-Mayer Studios the exclusive online rights to show in China the entire James Bond franchise.
But China's murky approach to censorships often leaves the industry guessing as to what its limits are in the country.
"It rains when heaven deems fit," said an anonymous Hollywood executive, citing the fluctuating diplomatic temperature between Washington and Beijing as a major influence in China's censorship rules.
Video sites are currently allowed to show only content that has been censored and cleared to show in theaters, to be broadcast on TV, or to be imported in the form of DVDs or other physical media. Content approval for imported discs and other media is cleared by the General Administration of Press and Publication, which two years ago was merged with the SAPPRFT.
