Because video sharing websites like Youtube are not a profitable business model in China, domestic online video websites are still exploring their business models and spending more on purchasing licensed products, said Zhang Chaoyang, CEO of Sohu.com, the country's leading portal listed on Nasdaq with online video service part of its business.

　　Zhang said the financial success from buying the exclusive online live broadcasting rights to the 2008 Beijing Olympic Games stimulated Sohu to spend more than 100 million yuan ($14.65 million) to purchase licensed video products and combat online video piracy on other websites.

　　"I can't deny Sohu has its own commercial interest when it comes to combating piracy, but this movement will benefit the cultural industry as well as the country," he told the Global Times Tuesday.

　　Largest anti-piracy campaign

　　Sohu, along with online video websites joy.cn and voole.com, formed the China Online Video Anti-Piracy Alliance on September 15. They have also rallied 110 online video companies, copyright owners and advertising firms to their cause.

　　This is the first time Chinese and overseas video copyright owners and advertising firms have allied themselves on online video piracy.

　　The alliance has initiated 111 lawsuits in Beijing Haidian District People's Court against Youku.com, the largest video sharing website in China, for alleged copyright infringement of domestic movies and TV dramas. The 100 lawsuits filed by Voole, eight by Joy and three from Sohu are in addition to another 178 lawsuits filed against Youku by members of the anti-piracy alliance that will be put on record by tomorrow.

　　Youku's size and popularity made it the natural target of the alliance, said Zhang.

　　The alliance said it plans to initiate a total of 503 lawsuits against Youku for alleged copyright infringement of domestic movies and TV dramas and it is asking between 50 million yuan ($7.3 million) and 100 million yuan ($14.7 million) in compensation.

　　"We are also preparing to collect evidence of Youku's copyright infringement of Hollywood movies," said Voole's Executive Assistant Zhu Jiang.

　　The alliance also plans to initiate lawsuits against major online video websites tudou.com and xunlei.com.

　　For its part, Youku announced Friday that it had filed a suit against Sohu at Beijing Haidian District People's Court, claiming that Sohu had spread false information about Youku's piracy problems, thereby damaging the video host's reputation.

　　Youku also stated it found many videos that it created were illegally broadcast on Sohu's site.

　　"We asked Sohu to cease copyright infringement and withdraw defamatory content," said Hong Lulu, public relations manager at Youku. She did not reveal how much money Youku asked for in compensation.

　　Sohu declined to comment on the defamatory issue, but said in a Friday announcement that batches of unlicensed videos were uploaded to its vblog, a video sharing channel, after they launched the anti-piracy campaign.

　　'Gray area'

　　Because China doesn't have a user-generated video content culture, individual users mainly upload unlicensed movies and TV dramas. Unlicensed American and South Korean dramas can be easily found on these video sharing websites, and these dramas attract about 80 percent of the total website traffic, Zhang said.

　　"We buy licensed videos but some video sharing websites hire contract staff to upload unlicensed videos and escape their supervision responsibility under the protection of the so-called Safe Harbor Principle," he said.

　　The principle, part of the Digital Millenium Copyright Act in the US enacted in 1998 and introduced to China in 2006, says if the service providers remove the contents or links of unlicensed products uploaded by users after getting a notice from copyright owners, they can be considered exempt from legal penalties.

　　But if they were "evidently aware of or have known of such infringement," they may share responsibility for copyright infringement.

　　"There are tens of thousands of videos uploaded to our website every day, and it is difficult to supervise them all, but we are always trying to solve the disputes by deleting unlicensed videos after getting notice from copyright owners," said Gu Yongqiang, founder and CEO of Youku.

　　"Video sharing websites owners should be aware of the risk of allowing users upload movies and TV dramas, and operating capacity should not be the excuse for them to avoid the supervision responsibility," Yao Kefeng, a lawyer from Zhuo Zhi Law Firm, told the Global Times.

　　"They should actively examine all uploaded contents instead of passively waiting to be told to take them down," he added.

　　Zhang suggested the current principle be amended. He said the lack of consciousness about intellectual property rights and the high costs of protecting copyright owners' rights give some video sharing websites a chance to operate in a gray area.

　　"Companies should bear criminal responsibilities for hiring large numbers of contract staff to upload unlicensed videos," he said.

　　In an August lawsuit, Youku was forced to pay 25,000 yuan ($3,662.5) for not deleting an entire TV drama after it was uploaded. This is in contrast to the fact that TV dramas now are sold for over 10,000 yuan ($1,465) per episode for Internet use and the price of popular dramas can be as high as 100,000 yuan ($14,650) per episode, according to Zhang.

　　Yao said the low cost of the penalties might also encourage video sharing websites to upload unlicensed material rather than spending a lot buying licensed products.

　　Fuzzy future

　　The online video business is seen by some as the next growth engine of the Internet economy. However, online video websites are still exploring their business models.

　　Zhang admitted that Sohu's vblog was involved in some piracy related lawsuits and that has also strengthened Sohu's decision to work only with licensed material. "When we realized that video sharing is not a business model, we scaled down this business and concentrated on buying licensed movies and TV dramas," he said.

　　"We are currently losing money on our video business, but our insistence on buying licensed video products will attract advertisers," Zhang said. But he added that he could not predict when Sohu's video branch might become profitable.

　　He said online video websites generate most of their income from advertising and that charging the viewers contributes only a small amount to the total.

　　Figures from Analysys International Consulting show that the total income of the domestic online video market reached 122.1 million yuan ($17.9 million) in the second quarter of this year, a 57.2 percent increase year-on-year.

　　"More advertisers will go to websites with licensed videos, because they don't want to ruin their reputation by being involved in infringement lawsuits," Zhang said.

　　Luo Weimin, COO of Xunlei, a website providing both online videos and video download services, said the increasing cost of copyrighted material and declining advertising income would make it difficult for many online video websites to survive.

　　In Zhang's eyes, anti-piracy campaigns such as that waged by the alliance will raise the entrance level for establishing online video websites, reshuffle the online video industry and also benefit the movie and TV industry in the long run.