China Court Hands Ad-Skipping Victory to iQIYI

A Shanghai court has fined two companies for developing and operating advertising-skipping technology that blocked commercials on Android versions of the mobile app for iQIYI, one of China’s top online video sites.

IQIYI this week said that its video service is now one of the 10 most downloaded apps in the world.

The court said that the MoreTV app, operated by Qianshan Network Technology and Yueguan Network Technology, amounted to intellectual property infringement and unfair competition, Chinese media reported.

While subscription income is now growing from a modest base, the predominant business model for China’s streaming video sites is advertising-supported. Ad-skipping technology damages that business model.

IQIYI sought over RMB1 million in damages from the two companies. It alleged that the ads are encrypted and that Qianshan and Yueguan must have hacked its code. The court ordered fines of RMB100,000 ($156,000) and a further RMB50,000 ($52,000) of legal costs.

According to App Annie, an online application ratings service, the iOS version of iQIYI’s app was the sixth most downloaded in the world – ahead of Google maps and Snapchat — and the ninth best globally in terms of estimated revenue from downloads.

Apps matter to the online video companies as they are a measure of the shift from PC and laptop-based video viewing to mobile.

In the same month, the top five iOS apps in China were all from online video firms, with two places held by Youku Video and Youku HD, and two others held by Tencent Video and Tencent Video HD.

App Annie said that iQIYI had been boosted by its recent deal to stream Paramount Pictures content in China and by its TV shows “Hua Qian Gu,” “Notes of Tomb Raiders” and “Extreme Challenge.”

According to App Annie, combined download figures for iOS and Android apps showed Chinese companies occupying five of the top 10 ranks. While Facebook and Google were the top two, Cheetah Mobile (a Chinese security app) ranked third, iQIYI’s parent Baidu fourth and Tencent fifth. Microsoft, Apple, Korean/Japanese messaging platform Line, China’s Alibaba and Hola Team, respectively, took the following five places.

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