March 28th, 2017

China’s new craze for live-streaming

Source: The Economist               Date: 9/2/2017

20170211_SRD005_0.jpg

LAST YEAR ZHAO XINLONG, aged 25, and his wife and baby boy moved from his parents’ farm into a mid-rise apartment in town. It has been a tough adjustment. Luan County is a rustbelt community on the polluted outskirts of the steel city of Tangshan in north-east China. Mr Zhao’s monthly income from driving a taxi has plummeted by more than half in the past couple of years, and he has not found it easy to make friends in his new abode.

But when he gets online in the evening, he becomes a different person: Zhao Long’er, an entertainer. Using Kuaishou, a Chinese video-sharing and live-streaming app, he broadcasts to a live audience of hundreds, sometimes thousands, of fellow Chinese every night. Taken together, they add up to more than 100,000. Many of them are diaosi, people who mockingly identify themselves as losers in dead-end jobs. Online he can relate to them, telling them stories, dirty jokes, whatever is on his mind.

Occasionally advertisers pay him small sums to put commercials out over his stream, including things like weight-loss products and “gold” jewellery from Vietnam. Most of his followers are also from north-east China. They chat with him online and sometimes give him digital stickers representing things like a beer that fans buy online and can be converted into cash. The individual amounts are usually small, but they add up. Live-streaming his life earns Mr Zhao about $850 a month, twice as much as his day job.

Twinkle, twinkle, little stars

The internet has amplified people’s interest in the world’s biggest stars, helping their fans feel a little closer to them, thanks to social media. But it has also made it possible for anybody to become a little star in their own corner of the universe, connecting intimately with subsets of fans. In much of the rest of the world the most popular of these are teen idols on YouTube, Instagram and Snapchat. Most people over 25 would struggle to name a YouTube star other than possibly PewDiePie, a Swedish gamer with a global following of more than 50m.

China’s craze for personal live-streaming runs far deeper, into third-tier cities and remote rural areas where the internet is the one and only fun and cheap place to hang out. These personal broadcasts are not simply videos that fans watch, but more interactive experiences. The fans make requests, chat with their idols and give them virtual gifts. Many of those watching are small-time live-streamers themselves. They are turning each other into mass entertainment.

It is a big and growing business. China’s live-streaming industry more than doubled in size last year, with revenues of around $3bn, according to Credit Suisse, a bank. More than 100 companies now offer the service, providing the platform for performers in exchange for a hefty cut of their earnings (one, YY, is publicly listed on NASDAQ, with $269m in gross revenues from live-streaming in the third quarter of last year, a year-on-year rise of more than 50%). That compares with box-office receipts for the Chinese film business, the world’s second-largest, of $7bn last year. Of the 710m people with internet connections in China, nearly half have used live-streaming apps.

Many in the audience are diaosi looking for free entertainment and sometimes a substitute for romance. Women outnumber men as live-streamers, but most of the audiences are male. The government has imposed guidelines aimed mostly at the seamier side of the business, like the erotic eating of bananas (now banned). The most successful live-streamers tend to be attractive young singers of either sex, who can sometimes muster millions of fans. The most popular of them earn more than $1m a year, almost all of it from virtual gifts, but most of them are lucky to see a few hundred dollars a month, broadcasting anything from eating meals to visual pranks to warbling tunes requested by fans. Mr Zhao laments that to boost his earnings, he has to tell more dirty jokes.

Live-streaming emerged in China after the financial crisis of 2007-08, as internet companies with questionable business models looked for a way to survive. Six Rooms, or 6.cn, may have been the first to offer live-streaming as a service for a mass audience. It was one of numerous YouTube-like video-sharing businesses (YouTube itself is blocked in China) burning money in 2008 and failed to secure a new round of funding. In desperation its CEO and co-founder, Liu Yan, turned to live-streaming.

In 2007 Mercedes-Benz, a carmaker, had paid 300,000 yuan ($39,000) to his site to live-stream an event, and his company had developed an inexpensive way to provide such a service on a wider scale to allow people to chat with each other and exchange virtual gifts. That helped make personal broadcasting a social game which could be monetised in a way not replicated on major social platforms of the West. In China, as well as in South Korea and Japan, where live-streaming has also caught on, virtual items have long had an underlying monetary value.

Now that the business model has been proven, all the Chinese internet giants have entered the live-streaming business. Pioneers like YY and Six Rooms must compete with bigger social platforms like Tencent. Six Rooms was acquired by a Chinese entertainment conglomerate for close to $400m in 2015, but Mr Liu, 44, remains the CEO. He has been using machine learning to work out what kinds of live-streamers inspire the most devotion from fans and get the most virtual gifts, down to preferences for facial features, tone of voice and regional provenance. He plans to unveil an even more ambitious effort soon: hired performers whose traits are determined, and perhaps enhanced, by machine learning. At this rate, life on the long tail of entertainment may start getting more difficult for rustbelt dreamers.