The Wall Street Journal-20080206-China Eases Control Over Existing Web Sites

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China Eases Control Over Existing Web Sites

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BEIJING -- China's government said new rules requiring online-video companies to be state-controlled don't apply to already-established Web sites, offering hope to privately owned Chinese start-ups whose fate had seemed threatened by the regulations.

A statement from China's State Administration of Radio, Film and Television and the Ministry of Information Industry clarifies rules announced in late December by the same two agencies that appeared to require all video-streaming Web sites to be owned or controlled by an arm of the state. Those rules took effect at the end of last month.

The new statement, issued Sunday, still appears to block the way for new private video-streaming companies that want to operate in China, including foreign companies such as Google Inc.'s YouTube that aren't here now. But it also suggests limits to regulators' willingness to tighten the reins too much on one of the fastest-growing sectors of the Internet. That follows other examples where announcements of sweeping new regulation affecting technology have been followed by less-sweeping enforcement.

The new statement says that "any company that was in compliance with the law prior" to the new regulations may "re-register and continue operation." It also warns that any site that has broadcast pornography or "promoted violence or other serious illegal behavior" will be punished. Less-severe offenses must be corrected within a certain time frame, after which the company can reapply to continue its services.

Streaming online video -- which lets users upload or watch others' video clips directly from the Web -- is increasing in popularity around the world and especially in China, which has the second-largest population of Internet users after the U.S. A growing number of China's more than 210 million Internet users are getting broadband Web access, which makes streaming easier. According to the China Internet Network Information Center, a government research group, 61% of Chinese Internet users had viewed video online as of June.

Like YouTube in the U.S., video sites in China are used to upload a variety of things, from short clips of street life recorded on cellphones to licensed full-length television programs to short films. Some users also use the sites to upload unlicensed broadcasts of American television shows with Chinese subtitles.

But video streaming worries Chinese censors, who tightly control content on television. Chinese sites generally censor themselves, removing politically sensitive material, but videos the government doesn't like sometimes make it online.

China's leading video-sharing sites, including Youku and Tudou, are privately owned and have raised tens of millions of dollars from venture capitalists. Founders of both Youku and Tudou have said they expected tighter regulation of online video. As it is, all Internet companies in China are required to have content licenses. "It's a little bit clearer now.... They're making more progress toward what's required to apply for online [-video] registration," said Victor Koo, Youku's chief executive.

By barring new privately owned players, the rules could actually help existing sites such as Youku and Tudou, limiting competition in the rapidly consolidating industry.

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Kersten Zhang contributed to this article.