More video websites have realized the importance of respecting copyrighted video, according to William Feng, general manager and chief representative in China of the Motion Picture Association (MPA). [Photo / China Daily]

BEIJING - When a new movie reaches cinemas, audiences in China have two choices - they can see it there or wait for the film to become available on the Internet.

Many video websites in China skirt copyrights by showing pirated versions of recent films. A large number of Internet users choose to watch newly released films on these websites.

But some other video websites have taken another path, by respecting film copyrights. Pioneering this trend are QIYI.com and LeTV.com.

"The Internet video industry has improved fundamentally," said William Feng, general manager and chief representative in China of the Motion Picture Association (MPA).

By late 2009, that organization had held dialogues with seven top video websites and related government departments, such as China's National Copyright Administration, to discuss practices used in the United States to uphold Intellectual Property Rights (IPR).

Positive changes were already noted in 2009. The government had strengthened IPR supervision and more video websites had realized the importance of respecting copyrighted videos, he added.

Ku6.com's acquisition by Shanda Interactive Entertainment Limited last year, LeTV.com's becoming listed on the mainland in August, and Youku.com Inc's listing on the New York Stock Exchange on Dec 8 are all signs of rising awareness of IPR.

"With more video websites seeking opportunities to get listed, the people running the businesses are facing more pressure to ensure that their sites operated in full compliance with local laws and regulations," said Huang Haifeng, a lawyer in the Jones Day law firm who specializes in Chinese IPR.

In China, more than 95 percent of a movie's revenue comes from box office receipts, compared with just about 30 percent in Hollywood.

Feng said that pirating movies on the Internet is disastrous for box office receipts and indeed the whole industry.

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In 2009, the Chinese movie The Founding of a Republic grossed about 420 million yuan ($63 million) at the box office, but its copyrighted sales to DVD distributors generated only a few million yuan, less than 1 percent of its box office revenue. Yet this is considered the best result in DVD copyrighted sales to date in China, Feng said. However, in Hollywood, sales of the DVD copyright accounted for more than 45 percent of the total revenue of a movie in 2006, he added.

In China, when dealing with the infringements, many producers and distributors are concerned that the cost of protecting rights is usually much higher than the amount of compensation they might get, said Huang Haifeng.

But on a positive note, he said, the number of cases concerning IPR infringement being handled by the courts is climbing and the amount of compensation is increasing as well.

In the United States, movies go through a typical cycle. Two or three months after their release in the cinema, they enter the DVD market. Another three months later, they enter the video-on-demand market, which is usually followed by pay-TV channels three months later. Finally, they reach the free TV networks about six to 13 months after the TV channels. The whole cycle is called the "golden window", Feng said.

"Content protection is critical for the success of the Internet business model," Feng said, "We are confident that it won't be too long before genuine Internet video channels surface."

Feng said that in his talks with the chief executives of those video websites, most of them doubted the feasibility of Chinese websites charging viewers for copyrighted video content. "I think it's quite possible for China to take the lead ahead of the US in Internet charging for video viewing, because most of opponents and doubters have neglected a big difference between the two countries - in Hollywood, there is the one-year 'golden window' after a film is released in movie theaters, blocking access to the films on the Internet. In China, the 'golden window' period doesn't exist," Feng said.

As Internet users pay more attention to the viewing experience, the number of viewers willing to pay for high-quality video on the Internet is rising.

LeTV.com says its monthly pay subscribers now number more than 300,000.

Feng says some video websites are studying how to charge for viewing next year and they are doing this simply in answer to growing market demand.