This is the first foray for the two studios into the ad-funded online video market in China. The premium segment of this market is still in early stages of development as major local content owners, such as the national broadcaster CCTV, only started to enter the market in 2009. With the late entry of broadcasters, online video consumption is dominated by online video portals, where the content offering largely comprises user-uploaded video. Screen Digest understands that Ku6.com is among the top 10 leading services of this kind in China.

Ku6 is not unique in its move towards premium content licensing - its competitors have also launched professional-video focused online video services, e.g. Toudou's Hei Dou site, and licensed TV and film content from local content owners. However, deals with Western content owners are very rare; studios are particularly conscious of licensing content to free-to-view standalone online ad-funded services, preferring to stick to paid models even in Western markets (the fact that Ku6 is listed on the NASDAQ and hence abides to US information disclosure rules has undoubtedly helped in securing the deal). 

Screen Digest believes that Chinese consumers will be even harder to persuade to pay for content than consumers in the Western markets; to that effect, exploring the possibilities of the online advertising market in China is a very important strategic step for studios intent on establishing a presence in the Chinese online space.