Court ruling clarifies need to regulate activities of online video platforms

A recent court ruling against a leading Chinese video streaming service has answered questions about demands for extra payment for "advance screening on-demand" access to popular new TV dramas and will contribute to the regulation of the industry, legal experts said.

On Jun 2, Beijing Internet Court said the actions of iQIYI, one of the country' largest online video service platforms, were unlawful when it demanded extra money for "advance screening on-demand" for a TV drama in addition to its premium membership, enabling people who subscribed to the add-on service to watch the new video content before others who had paid premiums earlier.

Advance screening on-demand, or early-access transactional on-demand, allows people to watch the latest releases or new video content before others if they subscribe and pay for the service.

"But the service cannot harm users' rights or interests," said Zhao Zhanling, a legal adviser with the Internet Society of China.

"It should be value-added, instead of weakening premium users' existing privileges."

Plaintiff Wu Shengwei said he paid 178 yuan ($25) to buy a one-year "gold VIP" membership from iQIYI in June last year.

The online contract said he would always be able to watch new episodes of popular TV dramas before non-VIP users.

But in December, he discovered he needed to pay an extra 3 yuan an episode if he wanted to watch the latest episodes of Qing Yu Nian, or Joy of Life, before other users.

"I've paid for my membership, and the company promised me I could watch ahead of others, in line with the online contract. Why did I have to pay the extra fees?" Wu asked, saying the extra paid service damaged his gold VIP privileges.

He took iQIYI to court at the end of last year.

During Tuesday's trial, the company said it began offering the new service by updating contracts on Dec 18.

But Zhang Wen, president of the court and the judge who heard the case, said in her ruling that "the unilateral and arbitrary alteration of some terms of its VIP membership breached the Chinese Contract Law and infringed on the rights and interests of members who previously had also paid premiums".

iQIYI did not effectively implement its obligation to notify users when their contracts were updated, she added, which made the changes to the advance screening on-demand service "invalid".

"The updated contents in the contract greatly diminished premium users' viewing experience and satisfaction," she said, ordering the company to pay Wu 1,500 yuan in compensation and extend his membership for 15 consecutive days.

The court did not ban the service, "but the business model must be operated based on nonviolation of laws and respect to users", she said.

On Tuesday, iQIYI responded via its Sina Weibo microblog account, saying that the introduction of the extra paid advance video-on-demand service had aimed to satisfy users' diverse demands.

It said the court had not condemned its use of such a business model, and it would constantly improve its products and services to bring consumers a better experience.

Tencent Video adopted a similar approach, setting up "VVIP" membership, in addition to its "VIP" premium membership, that allowed members to jump the gun on six episodes of Joy of Life last year by paying 50 yuan, Yicai Global, a financial news outlet in Shanghai, reported.

Tencent Video has not commented on Tuesday's case, but it said earlier that the service might have lacked sufficient thoughtfulness regarding its notices to members and consumers' sensibilities.

Yue Shenshan, a lawyer from Beijing Yuecheng Law Firm, said on his microblog that problematic clauses that could harm consumers' rights existed in many online agreements and the contracts of websites and smartphone applications.

"If there are no users like Wu, who initiated a lawsuit (to protect his legitimate rights), we'll have to swallow hard or be infringed upon," he said.

As to calls that consumers should protect themselves, he suggested that government departments needed to play a supervisory role and take the initiative to regulate the industry instead of taking measures after internet users sued service providers.

Zhao, the legal adviser, welcomed the ruling, saying it clarified the need to regulate the services provided by online video streaming platforms. But he said leaving the industry space to develop was also essential.

China Global Television Network cited figures from market consultancy Statista late last year, estimating that the revenue of the online video sector stood at 125.8 billion yuan in 2019, double that in 2016. Despite that, CGTN said, video streaming services were not profitable.

In a list of 10 new businesses that suffered the biggest losses last year compiled by financial news website Caijing, video-streaming websites iQIYI and Bilibili ranked second and seventh respectively.

Zhu Wei, deputy director of the Communication Law Research Center at China University of Political Science and Law, said the verdict showed that online services would not be allowed to damage consumers' rights.

"But how to keep the operation of new online services in order still needs more study and practice," he said. "After all, Wu's lawsuit is an individual case, and a ruling should not affect the development of an industry."

In addition, whether to pay extra money to get more services sometimes depended on consumers.

"Some online game players, for example, are often in a dilemma. They yield to temptation and pay more to buy equipment to be stronger than others in the games, even though they know they shouldn't spend too much on it," Zhu added.

Zhao said online entertainment platforms should give users a way to quit their membership, "or ask consumers to make their own choices".

"Add-on services should be offered to those who voluntarily pay extra money, and members should be told about any new services in a timely manner," he said.