When Ellen, Saturday Night Live, and Breaking Bad went ChineseFebruary 10, 2014: 1:17 PM ET
Demand is quickly rising for U.S. television and film on Chinese video sites.
By Scott Cendrowski, writer
FORTUNE -- Over the past couple of months, a bunch of free, HD American TV shows have started popping up on my iPad in China. Shows like Saturday Night Live, Homeland, House of Cards, and Ellen, which just struck a deal last month with Sohu.com (SOHU), one of China's Internet portals, to bring the talk show to China's potential 1.3 billion viewers. For an expat, this is bliss. For Chinese viewers, it's the newest wave of entertainment.
The Ellen deal got attention in late January in part because it's the first U.S. talk show to be carried in China. Also, Ellen DeGeneres said "Ni Hao!" six times while breaking the news. But her show is just one of dozens of U.S. hits to arrive in China recently. Online videos sites have spent the past two years buying rights to U.S. dramas and sitcoms in a fevered attempt to bring Lost, CSI, Breaking Bad, and others to Chinese watchers. Sohu, the Ellen buyer, has purchased the rights to more than 50 U.S. shows. Youku.com ( , its bigger competitor, has added 60.
The Chinese online video industry is massive -- this year online ads should generate $2.95 billion in sales, according to IResearch. And now that piracy is being contained in China, the video sites are on a new buying spree. They started by acquiring Chinese and foreign content as fast as they could. Prices for shows and films skyrocketed. The video execs have started to carve out niches for themselves: Sohu has focused on "premier" U.S. fare like Ellen and The Big Bang Theory; Youku has British hits Sherlock and Downton Abbey; v.qq.com has CSI; and Iqiyi.com is focused on celebrity entertainment.
After buying dramas and comedies, the sites are now wading into the next American genre -- live and unscripted entertainment.
Last month Saturday Night Live announced a deal, again with Sohu, to carry new shows on the site. Sohu CEO Charles Zhang said he hoped SNL would attract not just the audience they already had, but also more high school and university viewers that advertisers clamor for. He said young audiences think being a fan of American culture exhibits class and standing. Zhang spoke at a December event promoting SNL where journalists asked him how the show's cultural references would be interpreted. He didn't seem bothered: subtitles!
American TV shows account for 20% of Sohu's video clicks. Ellen falls into the same live entertainment niche as SNL and follows Sohu's formula of buying upbeat U.S. shows with tons of celebrity appearances. The deal came about after Warner Bros. Television, which distributes the show, heard interest from Sohu for Ellen as part of the site's push to take on bigger rivals Youku and Baidu's iQiyi, which recently merged in a $370 million deal with rival PPS. Ellen was a big win for the studio. "It has long been a goal to bring Ellen's unique brand of light entertainment to China," said Jeffrey Schlesinger, president of Warner Bros. Worldwide Television Distribution, in an email.
Sohu's video revenues tripled in the latest quarter, and the company continued to spend on video content and web infrastructure. But in a show of the costs involved in purchasing dozens of foreign TV shows like Ellen, Morningstar analysts don't expect the video business to turn profitable until 2015.
You get a sense for the popularity of U.S. hits the more Chinese people you talk to. Last year a couple of Chinese friends asked me out of the blue, because I'm American, "Do you know The Big Bang Theory" (Shenghuo Da Baozha)? I told them not only did I know it, but my uncle directed the show. They were shocked. It was their favorite show. Maybe I could get them some swag?
After watching a couple of shows on Sohu, you quickly understand why its video site is so successful. The interface is intuitive like Netflix's (NFLX), the ad-supported service means you don't need to fork over a credit card, and even the commercials are limited to half a dozen 12-second spots in films. Watching television episodes, I only have to sit through one 15-second ad in the beginning. The whole service feels as seamless as anything in the U.S.
That's in part why American shows will continue finding their way into China. The technology is here. The market is maturing. The audiences are huge. And viewers are beginning to demand American fare.