Traditional TV facing challenge from the Web

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Apart from offering 5,000 movies and 90,000 episodes of TV series to subscribers, LeTV has also upgraded its television operating system every weekend since July, based on customer feedback.

Following user suggestions, the company provides a remote video surveillance service for the home that allows parents who are at work or on a business trip to stay connected with their children. It also launched a software application to turn a smartphone into a remote control for its smart TV.

In the future, users will be able to post comments on TV screens while watching movies and receive instant responses from their friends.

They will also make decisions on which TV dramas should have special channels of their own so viewers can watch any episode they like at any time.

"For traditional consumer electronics manufacturers, their job is done once they deliver a TV set to the customer. But for Internet companies like us, our job has just started," said Peng.

With the further development of OTT TV, new business models will be created based on a large screen, according to Liu.

For example, while watching the main characters having dinner at a fancy restaurant, the audience may pause to read a brief introduction to the restaurant that will cover its location, specialties and head chef.

If they like a dress worn by an actress, they can easily discover its label and try it on virtually on TV, having a full-body scan before making a purchase.

Statistics reveal advertisers prefer TV to other types of media. About 76 percent of advertising expenditure is allocated to TV networks in China every year.

So the advertising value of an online video portal is bound to improve if it appears on the TV terminals of millions of users nationwide, and the portal can help marketers advertise across all screens, said Luan.

However, an effective profit model has not yet emerged, even though many OTT TV and set-top boxes are burgeoning across China. Industry analysts said that whether OTT video service providers can recover their huge investments in copyrighted content and hardware is still in question.