Bilibili transforms from anime pirate site to streaming boss

SHANGHAI — A horde of live streamers drew 1.78 million viewers to video platform Bilibili as they performed music or engaged in cosplay celebrating classical Chinese culture during a three-day event in March while the country weathered coronavirus lockdowns.

The viewers flooded the screen with complimentary comments for the streamers. But more crucially, many responded to an option to send “virtual gifts” of differing monetary values to their favored content creators — and a cut of the proceeds went to Bilibili.

This monetization model has helped propel Bilibili from its origins as an anime pirate site to a video streaming powerhouse.

“Bilibili is already the largest video streaming platform in China,” Chief Operating Officer Li Ni told Nikkei. The user base for the Nasdaq-listed Chinese company totaled 172.4 million people at the end of March, jumping 70% from a year earlier.

“We aspire to be the platform for the entertainment sector,” Li added.

Bilibili attained this dominance after tweaking its business model multiple times. It launched in 2009 as a video sharing site where users were free to upload unauthorized anime. Even the name “Bilibili” is an homage to the main character of the anime series “A Certain Scientific Railgun.”

The primary attraction of the site is the ability of viewers to post comments that scroll live across the screen, a feature that mimics Japanese streaming site Niconico.

The illegally uploaded content eventually landed Bilibili in hot water. The website reorganized into a YouTube-like platform for streaming privately made content.

Li Ni, chief operating officer of Bilibili, says that the company seeks long-term growth instead of short-term profits. (Photo courtesy of Bilibili)

The format change was not enough to lift earnings in the video streaming segment. In 2016, Bilibili experimented with in-video advertisements to try to monetize streaming. But the company lost viewers who were turned off by the distracting ads. With the advertising model a bust, Bilibili continued to derive most of its earnings from the mobile game business.

The company shifted focus toward developing an army of content creators. It quickly identified promising streamers and kept them in the fold by offering expertise on profiting off video content.

That strategy lets Bilibili boast of having about 1.8 million streamers, a strength unmatched on rival video sites. Gifting has become customary among young viewers, creating a valuable revenue stream.

“The ability to interact with popular video streamers has drawn young people who are willing to pay money to view the streams,” Li said.

Bilibili also devotes resources to licensing and producing anime and film content, which are viewed for a fee.

As a result, the streaming operation recorded sales of 790 million yuan ($112 million) for the quarter through March, up 170% from the year-earlier period. For the first time ever, video games accounted for less than half of the revenue mix.

Bilibili has yet to reach profitability, however, due to its string of forward-looking investments. During the same January-March quarter, the net loss expanded to 530 million yuan.

“We aim to become an enterprise that attains long-term growth, and we are not planning for short-term profitability,” Li said.

Now the company is preparing to enter its second growth phase fueled by the stay-at-home demand. Bilibili is using the popularity of its platform to attract investors.

In April, Sony agreed to infuse $400 million into the company, a deal that will add more anime, video games and music content. Chinese tech giants Alibaba Group Holding and Tencent Holdings also fund Bilibili, which plans to deepen partnerships with each backer in e-commerce as well as in anime and music.

The coronavirus pandemic “is turning into a tailwind for the entertainment market,” Li said. “Online consumption is expected to grow further, which also gives Bilibili an opportunity for growth.”

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