PPTV has long positioned itself as providing professionally produced content, or long videos, as opposed to the user-generated content model, or short videos from ordinary users that Youku and Tudou appealed to. Therefore, content purchase has always been a cornerstone in which the company heavily invested.

It has almost monopolized all Korean TV dramas over the next three years, accrued one-third of exclusive copyrights for TV series from the Chinese mainland, and close to two-thirds of entertainment shows from Taiwan.

In a similar move to lure viewers, Youku spent 152 million yuan over the past three quarters on content purchases, nearly doubling its total in 2010 of 82.7 million yuan, according to its financial reports.

Charles Zhang, founder of search engine Sohu and its chairman and chief executive officer, said in July that the copyright purchase market is now filled with bubbles caused by fierce competition. The price of an episode of a TV series has risen from several thousand yuan a few years ago to as high as 800,000 yuan.

PPTV is also moving toward self-made TV shows. The cooperation between PPTV and Hunan Satellite TV, which co-launched a reality show featuring the everyday life of contestants competing in a talent show called Happy Voice Girl, has yielded sizable earnings for PPTV. High advertisement return is certainly cheering, but what Tao values more is the increasing user "stickiness".

During the 72 days the show lasted, contestants lived in a castle and their life, training and rehearsals were broadcast on PPTV, a time span too long for TV shows. The site also established interactive rounds for contestants to have more chances to communicate with fans.

"The profit margin will remain low if online video media solely relies on advertising because the soaring cost of purchasing content will erode much of the profit gained. That's why we need to produce something really unique that makes viewers willing to spend money," Tao said.

To better shore up the business and further integrate its resources, PPTV will co-launch a Chinese-Korean entertainment show with Shanghai-based Dragon Satellite TV in March.

China's online video sector enjoyed prosperous growth over the past few years. Youku and Tudou combined took 35 percent of the advertising income while PPTV took 6.5 percent, according to information technology consultancy Analysys International.

Tao said PPTV and the likes of Youku Tudou have differentiated target audiences and therefore do not necessarily compete with each other. PPTV attracts viewers that are consistently engaged in a TV series, whereas Web-based sites provide easy access for "light" users.

hewei@chinadaily.com.cn