Yale Club of Beijing: Harbinger Interview with Julia Zhu (SOM ’98)

The Harbinger recently spoke with Julia Zhu (pictured left), Yale SOM alum, active Yale Club of Beijing member, and co-founder and CEO of Phoenix Live Entertainment Company. In the interview, Julia shares her views on key trends within China’s entertainment market, from monetizing IP and key content channels to the continued importance of offline models.

The Harbinger is an online, English language content platform covering innovation in China’s tech industry founded by Adam Bao, Yale ’12.

Can you tell us more about the key channels in China used to pipe entertainment content to consumers?

BATs (Baidu, Alibaba, and Tencent) are huge.  They have resources to aggregate all types of entertainment content, and invest in many of the hot start-ups you hear about.  Bilibili, Douyin, some of the relatively newer content sharing platforms are also super popular. In China, the audience base is huge, much larger than in the US, and people are willing to pay top dollar.  For example, iQiyi, which is comparable to Netflix in the US and just went public, has over 60 million paying subscribers. This is a big change from back in the day… when everyone was just pirating content.  I remember trying to sell set-boxes in the past and no one would actually pay for it, what a change!

TV networks in China are huge.  But as users shift towards consuming content on mobile devices and over the internet, how are these traditional players responding?

As an overview, there are hundreds of TV stations with thousands of channels and these networks are generally controlled by central, provincial and municipal governments. Each province has a major satellite TV channel, each with its own positioning.  For example, Hunan TV has for a long time been entertainment focused leanings towards a younger audience. Hainan TV is more travel based.  Guangxi is more focused on fashion related topics. These TV networks are very important, and some are still quite popular.

And how do they make money?

Advertisement.  Advertising dollars from the commercials. Popular shows like “The Voice”, “China’s Got Talent”, etc. generate significant advertising dollars.  Furthermore, there are also competitions and road shows where they organize concerts before and after the program, which generate ticket sales, sponsorships and product placement.  All in all it’s quite dynamic and successful.

Some of these TV stations also seem active when it comes to investment, or trying to create their own internet based products.  What is their strategy there?

As an example, Hunan TV also has Mango TV, which is similar to iQiyi.  They’ll charge for subscriptions, with their exclusive international and domestic shows.  They are able to buy a lot of popular and good quality entertainment from around the world, including the Oscars, Grammy Awards, Eurovision, etc. That comes back to the philosophy Rupert Murdoch used to push through News Corp and all of its subsidiaries and affiliated companies that content is king.  At the end of the day, it doesn’t matter what innovative technology or platform is used, it always reverts back to what the best content is.

That being said, mobile and internet distribution platforms make content easily accessible to a lot more people.  That helps enhance content, because there is more data… more feedback, faster feedback from consumers, which allows creators to better refine their content.

Content is king, but how can you best monetize it?

That’s the million-dollar question. That’s constantly on my mind, and I’m constantly looking for great IP, creating our own IP, and licensing our own IP from around the country and also overseas. There are multiple revenue streams from IPs. For example, there’s a popular Japanese book called 解忧杂货铺; there have already been two movies made (in Japan and China) based on the book. Early this year, it has been produced into a stage show. From a book, it has been made into movies, stage shows, and leveraged for merchandising as well. All these revenue streams extend from quality IP. People recognize this, and the market is becoming more and more mature. I would say this is where the investment should go into: top quality IPs, and not only just the IP holder but also the operators that are experienced in helping establish the commercial value chain of these IPs. At the end of the day, creating IP that is commercially viable is really hard  but the returns can be fabulous if you do it right with patience and capture the right timing to market.

Application of AI in entertainment industry?

In the future, everybody can be an author, a creator. That’s the beauty of the Internet, or what we call “personal media” (自媒体). You can put your work out there and let the market judge. The problem  is that the quality of 90% of internet “personal media” content is usually lacking in quality. AI can be an efficient and effective curator for the millions of work out there created by professionals and amateurs. Of course, AI can also help leverage all the data and intent signals generated to rank and cherry-pick the best chosen ones.  This is already being done (think Netflix, Spotify, Youtube recommended content), and will only continue to improve!

Why not just watch on the Internet?

The experience of going to live events cannot be compared with watching live streaming on your smartphone or TV. It’s very different. For live show events, you share this experience with your family members, friends and all the people around you. There has been revival of live entertainment probably because people spending too much time on the Internet.  In addition, Chinese consumers are going through a transformation of shifting spending power to more services and immersive live experiences, such as travel and live entertainment events.  Shopping malls and travel designations in China also need more live events to drive on ground traffic to these venues.
The trend I see in China and also around the world is that there’s a big come back for live events, and notably music festivals for outdoor and pop-up style entertainment exhibitions with merchandising opportunities for shopping malls.  For example, the growth of music festivals around the world is on average between 30- 50% on an annual basis. There’s a huge surge of music festivals. There are going to be Creamfields and Ultra in Beijing, and EDC was in Shanghai a few weeks ago. They are all coming to China!