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China Continues Crackdown On Video Streaming Sites, VC-Backed Huya, Miaopai Penalized

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YY Inc's live video streaming homepage.

The Chinese government continues to crack down live video streaming portals and mobile apps, closing another 11 apps due to concern over pornographic content, the Ministry of Culture said in an official announcement yesterday.

Over 30 live video streaming portals and mobile apps were also penalized, including venture-backed Huya, MiaoPai and NASDAQ-listed YY Inc. YY’s shares were down 1.8% and Momo Inc., a social dating mobile app that also runs live video streaming, saw shares down 2.3% yesterday.

The announcement did not say specifically how these companies were penalized, but all three video portals, Huya, MiaoPai and YY, were still operational as of noon, China time.

The Ministry of Culture closed 10 live video streaming platforms last month, and asked numerous online portals including Sina Weibo to terminate video services unless they obtain required licenses. The Chinese government has initiated a campaign to clean up pornographic content from live video streaming sites since the beginning of this year.

Video streaming has exploded in China, with total users growing to 344 million in 2016 from 200 million in 2015, indicating a 72% annual expansion. Live streaming of sports events took a 20% market share, while host chat shows and game streaming each took a 19% and 16.5% share in mid-2016, according to China Internet Network Information Center.

The current crackdown centers on host chat and live performance streaming apps, with all of the apps closed or penalized offering female performance that contains pornographic content. Live video steaming hosts, usually young attractive women, make money by receiving virtual gifts from fans. The hosting platform shares a portion of the income with the hosts, with the most popular hosts making millions of RMB per month.

Huya is owned by YY and backed by China Ping An Insurance Overseas, Banyan Capital, Morningside Venture Capital and Engage Capital. MiaoPai, owned by Yixia Technology, received investments from Weibo Corp., Sequoia Capital, and South Korean entertainment firm YG Entertainment.

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