The Chinese are uploading more Internet videos of sex, scandal and protest. It’s big business—and a headache for Beijing. With an audience estimated at 78 million people, online video is big business in China: Western venture capitalists have poured $120 million into the industry since 2004, according to CCID Consulting, a leading Chinese IT firm. Tudou.com, China’s largest video sharing website, serves more than a billion minutes of video per day, some 30% more than YouTube. “People spent twice as long on Tudou than on YouTube ,” says CEO Gary Wang, who founded the company in Shanghai in 2005. “They really get in and get stuff they don’t typically see on TV.”

But regulations issued by SARFT and China’s Ministry of Information Industry (MII) could be putting an end to that free ride — and sending a shot across the bow of sites who host unauthorized content. Starting January 31, 2008, online video posting will be limited to state-owned or state-controlled video providers; clips that contain violence or sex or are considered “detrimental to the nation’s security” will be deleted immediately. The regulation mainly targets content uploaded by amateurs; experts believe TV and film clips will largely remain untouched. But the most controversial section of the new regulations — that all the video providers have to be state-owned or state-controlled — would almost certainly put the future of online providers like Tudou and competitors Youku.com and 56.com in question, as well as threaten Chinese web portals with video sharing features like Sina.com.

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