Demand and Development in China’s Entertainment Industry

IP Monetization in China

IP regime in China

How historical trends shed light on the development of China’s cultural and creative industry under the new, global norm 

BY DR. JILI CHUNG and ashley clark

At the inauguration of US President Joe Biden, the global market saw a surprise from new media platforms leveraging IP and new technologies.  The stock price of Netflix, the leading company amongst them, soared 13% in one day.  This movement in the market reflects the positivity surrounding the cultural and creative content delivered online, especially when the pandemic may continue to lock down a hefty portion of the world for the near future.  
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Similar trends are also happening in China.  Taking a closer look at China’s cultural and creative industries – and Netflix’s counterparts – offer interesting observations. 
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A driving force for quantitative growth from the cultural and creative industries is the thirst for content.  Investors in China have become aware of a commercial fact: if the content is reflected in some form of IP (mainly copyrights, often called “content IP”), then they could derive more value from such content IP down the road.  This is especially the case for the TV and film industries. This demand is also making content IP monetization easier in these market sectors.  
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Enthusiasm in the TV and movie industries results from the following social and economic phenomena:   

• Private money is seeking investment outlets. As investors are eager to put their money on the table, producers enjoy greater bargaining power in realizing the value of their IP.  

 

• Successful international stories demonstrate the potential of copyright monetization to Chinese producers. Take Lord of the Rings or the Korean series Jewel in the Palace (Dae Jang Geum) for example. The Lord of The Rings boosted the tourism industry in New Zealand and Jewel in the Palace created successful theme park based on the series. A popular Chinese TV series – Nirvana on Fire (Lang Ya Bang) – successfully followed suit by creating a tourist spot to further monetize the IP of the TV show. More are joining this game. Many resources are available for these types of projects, all one needs is a decent IP to kick off a project.  

• The market has formed an effective value-adding production line for content IP. Market intelligence says the movie industry has a “magic formula”: a famous director, a convincing cast, and good connections. In the right environment with that formula, a box office success is very predictable. As such, the missing fuel for the value-adding process, i.e., IP, is in high demand to start the “chemical reaction.”  

• Quota control from the Chinese government plays a role. China sets annual importation limitations on foreign TV programs and movies. With limited competition, domestic products can more easily achieve financial success. This enhances the interests of investors in IP monetization in copyright-related areas.  

• All these phenomena are aided by a government policy of encouraging a “cultural revival.” The government is seeking to replace imported TV series or movies from Korea, Japan, and other Western countries with domestically produced content. In this context, domestic IP is especially welcome.  

IP creation takes time. Demand now outstrips supply, resulting in temporary imbalance. Online forums have filled that demand in extreme cases. When scripts and novels were too scarce, two-to-three-page story outlines reportedly became tradable in 2015. After some debate and chaos, the copyright markets had been gradually going back to normal in 2018.   

Yet recently, following the success of IP securitization for patents in high-tech industries, the market appetite appears to be shifting towards other kinds of IP. Now, IP securitization is not only used to finance patents from high-tech industries but is also a tool to monetize ideas, stories, and scripts – “IP content” – from the cultural and creative industry. 

Under the influence of covid-19, we are once again at an imbalance of supply and demand. Movie theatres had to shut down for half of 2020, which badly hurt China’s film industry, but also gave rise to online entertainment and inspired new forms of entertainment like short-form videos. 
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Given the precarity of the pandemic’s trajectory, we can only expect that the way in which people consume entertainment will continue to transform, allowing for the growth of new ideas, platforms for entertainment, and content to be monetized. ​

Interested? Connect with us and read more about the cultural and creative industry’s relationship to IP in China by visiting our blog at ictiger2020.com – e.g., “The First IP Securitization Deal in China”. 

Or find us on our Facebook at ICTiger2020 for regular news updates on related topics. 
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Sources： 
Our very own, Innovation’s Crouching Tiger. 
https://amt-lab.org/blog/2020/12/case-study-china-entertainment-market-under-covid-19 

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