A lawsuit cannot stop the pace of advanced on-demand "money-oriented" users are wavering

"It's so satisfying!" said an iQiyi Gold VIP member to Sina Technology after the first-instance verdict of the iQiyi "Joy of Life" advance on-demand case was released. The starting point of this incident was in December last year, when Tencent Video and iQiyi launched advance on-demand for "Joy of Life" - members can get the privilege of advance on-demand by paying 50 yuan again, and always watch 6 more episodes than members. After the expiration of this rule, it supports unlocking each episode with an additional payment of 3 yuan per episode. At that time, the plaintiff in this case, Wu Shengwei, a lawyer at Shanghai Zhengce Law Firm, believed that the advance on-demand violated his legal rights as an iQiyi Gold VIP member, and sued iQiyi to the Beijing Internet Court.

The first-instance verdict was announced yesterday afternoon. The Beijing Internet Court held that the defendant Beijing iQiyi Technology Co., Ltd. should provide the plaintiff with the rights of the iQiyi platform's gold VIP membership for 15 consecutive days, enabling it to enjoy the right to watch the updated popular TV dramas on the iQiyi platform and iQiyi's self-produced dramas, and should compensate the plaintiff for the notarization fee loss of 1,500 yuan within 10 days from the date of effectiveness of this judgment. As for the plaintiff's other claims, the court rejected them.

Court trial

In this regard, Sina Technology has successively asked Youku, iQiyi, Tencent Video, and Mango TV, four video platforms that have implemented the advanced on-demand mode. iQiyi said that the introduction of the advanced on-demand mode is to meet the increasingly diverse content viewing needs of users. "Thanks to the Beijing Internet Court of First Instance for not denying our exploration and attempts, and affirming that 'there is nothing wrong with the advanced on-demand mode itself'." In addition, iQiyi said that it will continue to improve its products and services to bring better experience to users, and reserves the right to appeal other judgment information.

As of press time, the other three platforms have not responded. Just on Monday, Tencent Video's exclusive drama "The Rumored Chen Qianqian" launched an advanced on-demand viewing of the finale. Some people said it was very enjoyable to watch, while others were still hesitant. Users were also wavering between paying for it and boycotting it.

The court believes that there is nothing wrong with advanced on-demand viewing

Let’s first look at the judgment. The key point is that the court did not deny the advanced on-demand model itself, but emphasized that it should not harm the existing rights and interests of members.

The first item of the judgment confirmed that the second paragraph of the introduction to the iQiyi Member Service Agreement, which attempted to exclude the provisions of Article 40 of the Contract Law, was invalid, which violated the mandatory provisions of Article 40 of the Contract Law on the validity of standard terms.

The second item of the judgment is that the advanced on-demand service is a vertical block cut into the integrity of the membership rights of iQiyi's Gold VIP members to "watch popular dramas first". The unilateral addition of terms has damaged the rights of Gold VIP members to watch dramas in advance, and it is determined that it has no legal effect on the plaintiff.

The third item of the judgment is that within 10 days from the date when the judgment of this case takes effect, the defendant shall provide the plaintiff with the rights and benefits of the iQiyi platform Gold VIP membership for 15 consecutive days. It should be emphasized here that Wu Shengwei's membership will expire in 15 days, so there are only 15 days of free content left.

According to the fourth item of the judgment, the defendant shall bear the plaintiff's notarization fee of RMB 1,500.

The fifth item of the judgment dismissed the plaintiff's other claims. The court determined that the specific content of advertising privileges and member-exclusive recommendations were clearly defined in the iQiyi membership service agreement and did not constitute a breach of contract. The lawsuit request to cancel the advanced on-demand function was also included. The court believed that the industrial model that serves the needs should be inclusive. On the basis of member payment, it is not wrong to dig deep into the needs, fit the users, give birth to differentiated and adaptive personalized services, and explore new ways of video scheduling. "What needs to be paid attention to is that the healthy development and operation of the business model is based on compliance with commercial terms, respect for user feelings, and no violation of relevant legal provisions."

Wu Shengwei wrote on his personal Weibo that he was satisfied with the content of the judgment and the court's arguments, but contract litigation is relative, and the result of the lawsuit can only be directed at the individual and cannot benefit the majority of people. More users asked in the comments of related topics: Since there are so many episodes on pre-order, should we also look at other platforms?

Controversy over advanced on-demand services: a disguised downgrade of membership

From the perspective of video platform users, there are two reasons for paying for membership: one is to be the first to watch, and the other is to remove advertisements. The reason why members are angry about the advance viewing is that there is a threshold for the advance viewing - members can indeed watch the video first, but as long as they spend more money, they can watch it even earlier, and it seems that there is no end.

Wu Shengwei said in an interview that if users purchase iQiyi Gold VIP membership after the launch of the advance on-demand service for Joy of Life, they will be subject to the corresponding terms and conditions as the membership service agreement has been changed. However, for users who were already iQiyi Gold VIP members before the launch of the advance on-demand service, the advance on-demand service has deprived them of the right to watch the series in advance, which is equivalent to iQiyi breaching the contract. The aforementioned iQiyi Gold VIP member once complained that the advance on-demand service diluted the value of his membership, which was equivalent to a disguised downgrade of membership.

Amid the controversy, Tencent Video and iQiyi admitted that they did not fully inform members and were not considerate enough of their consumption psychology, and emphasized that the original intention was to meet users' more diverse content needs. Wu Shengwei believes that the video platform did not handle the introduction of advanced on-demand services well enough, and should have adopted a more gentle approach, respected users' choices, and provided users with a mechanism to exit when changing terms, such as appropriately refunding fees when users no longer use their membership due to changes in terms.

Li Min, senior partner of Shanghai Han Sheng Law Firm, also mentioned that video platforms can make additions to members' existing rights, but they cannot hinder, cover or restrict existing membership rights by extending new products and services. On the premise of meeting this point, other services can be used at the same time.

In this process, the possible proliferation of piracy is also worthy of attention. After the advance on-demand broadcast of "The Rumored Chen Qianqian" was launched, Baidu Cloud, WeChat, etc. immediately became the distribution center of piracy. Under the video clips circulated on Weibo, there were many calls to support genuine products. Piracy seems to have become the inevitable fate of popular dramas under advanced on-demand broadcasting, such as "The Untamed" and "Joy of Life". Although Wu Guanyong, director of the Copyright Monitoring Center of the Copyright Association of China, once explained that there is no necessary connection between piracy and advanced on-demand broadcasting. However, the variable of piracy has made non-paying users of video platforms run faster than gold VIP members and users who pay for advanced on-demand broadcasting. It is difficult for users to balance their psychology, and video platforms have also suffered huge losses.

ARPPU needs to be improved urgently amid the member penetration dilemma

The motivation for video platforms to go the route of advanced on-demand viewing is simple: to expand revenue and strive to get rid of losses as soon as possible. Except for Mango TV, which is backed by Hunan Radio and Television, the losses of Youku, iQiyi and Tencent Video have become old news.

According to the financial report, iQiyi's net loss in the first quarter of 2020 was 2.9 billion yuan, compared with 1.8 billion yuan in the same period last year, a year-on-year increase. In addition, iQiyi's advertising revenue has been negative for four consecutive quarters - affected by macroeconomic factors and the impact of short video platforms. At the same time, membership service revenue was 4.6 billion yuan, a year-on-year increase of 35%, accounting for 60% of total revenue. As of March 31, iQiyi's total number of subscribed members was 118.9 million.

iQIYI membership growth rate

However, video platforms including iQiyi still face the dilemma of member penetration. When the era of land grabbing ends and it becomes increasingly difficult to harvest users in the gaps, perhaps they should consider improving the too low ARPPU. In the first quarter of 2020, iQiyi's monthly ARPPU was about 13 yuan, only one-sixth of Netflix.

Advanced on-demand streaming has begun to flourish, but how effective is it? Taking The Untamed as an example, it is reported that Tencent Video’s final on-demand streaming revenue exceeded 150 million yuan. The number of its paying members in the third quarter of last year was 100.2 million. Based on this, it is estimated that the increase in ARPPU (average revenue per paying user) from the advanced streaming of the drama in this quarter was less than 1.5 yuan.

After iQIYI founder and CEO Gong Yu mentioned the segmentation of the membership system in the earnings call, iQIYI launched a new membership service - Star Diamond VIP membership, which allows users to watch iQIYI's advanced on-demand dramas and Star Diamond Cinema movie content for free. Membership rights have also been further expanded, covering multiple membership rights such as FUN membership, literary membership, sports membership, VR membership, etc. Users can enjoy Star Diamond VIP membership services through mobile devices, computers, smart TVs, tablets, and VR devices. Of course, the price has also increased - the monthly purchase price of Star Diamond VIP membership is 60 yuan, while the corresponding monthly purchase price of Gold VIP membership is 19.8 yuan; the continuous annual package of Star Diamond VIP membership is 398 yuan, and the first month price of the Star Diamond VIP membership monthly card for new users is 12 yuan, which is twice that of Gold VIP membership, which is 6 yuan.

Screenshot of iQiyi Star Diamond VIP membership payment page

As users waver, the platform connection problem

Du Ying, a professor at the School of Law of the Central University of Finance and Economics, shared her views during the live broadcast of the trial: "I think in this case, the court actually did a good job of balancing the protection of consumer interests and the healthy development of Internet companies." She believes that the purpose of this judgment is to enable the entire video industry to continue to develop in a healthy manner, so that users can have more good programs to watch, and the platform can both acquire users and make profits, promoting a virtuous circle.

Despite the verdict and criticism, the advanced on-demand streaming service is still going strong. The aforementioned iQiyi Gold VIP member told Sina Technology that although he was very dissatisfied with the video platform's launch of advanced on-demand streaming, he still couldn't help but pay for it. "This is also a kind of contradictory psychology for me as a user, which is enough to illustrate the temptation and compulsion of the advanced on-demand streaming service," he said.

Users are willing to pay for the content they want to watch, but how to implement it in a specific payment method is currently a big question mark. In Wu Shengwei's view, as more and more users choose to defend their rights, the platform may avoid risks in this area. The most likely way is to perform notification and negotiation services when changing member rights. He pointed out that there is no doubt that users have the intention to pay for content. It is just a question of whether the video platform can connect well. In addition, the process from free to paid is actually very difficult to cross. It is a very big difficulty and a topic that video platforms must think about.

As for users, if you accept advanced on-demand viewing, what kind of content do you want to pay for? If you refuse advanced on-demand viewing, will you turn around and watch pirated content? If the video platform provides you with advanced on-demand viewing in a way that is more considerate of user experience, will you pay for it? The platform has its own considerations, and as a user, you will naturally have your own choices.