BEIJING - The website of China's biggest Internet video company Youku Tudou Inc was once a haven for illicit Hollywood blockbusters and hit South Korean soap operas, until it realised piracy really doesn't pay.
Now the company that controls almost a third of China's booming online video market forks out more than a billion yuan (S$205.7 million) a year on licences so it can legally distribute movies and shows like "The Walking Dead", a strategy expected to result in its first ever quarterly net profit.
And to protect this market share, Youku Tudou employs a dozen sleuths who scour the web for pirated content, highlighting how China's online video industry is courting higher advertising revenues and better relations with foreign media firms by cracking down on illegal content.
"The biggest challenge is that there are more new ways to pirate video as the technology develops," Lu Changjun, the head of Youku Tudou's Internet police squad, told Reuters.
In the past, China's video websites were rife with pirated films and TV programmes, often put there by users. Companies also repeatedly sued each other for copyright infringement.
Youku Tudou and rival Baidu Inc, China's search engine giant with the second largest market share of online video, both told Reuters via email this week that they never deliberately ignore pirated material on their websites, and never wilfully upload unlicensed content.
Tencent Holdings Ltd, which runs China's fourth-largest online video site, also told Reuters it never ignored or engaged in piracy.
All three companies, however, also said they have lost copyright infringement lawsuits filed by other Chinese firms in local courts.
Better technology has now helped these firms police their sites more vigilantly.
Advertisers willing to put money on legal content, and the popularity of online video, have also provided incentives: China's online video market is expected to grow by more than a third this year and see annual revenues of 12.3 billion yuan, according to data from Beijing-based Internet research firm iResearch.
Youku Tudou and Baidu, as well as rivals Sohu.com Inc and Tencent, all say they are fighting piracy.