(Yicai Global) Oct. 12 -- Membership fees are becoming a major source of revenue for video sites. According to a recently published legal filing, iQiyi, a Chinese video platform, won CNY2.03 million yuan (USD279,130) in damages in a lawsuit against account renting.

According to the first-instance ruling document, which was published on China Judgments Online, Blade Network Technology was ordered to compensate iQiyi for providing a platform for users to rent iQiyi accounts and charging a handling fee.

Anhui-based Blade Network Technology charged lessors a minimum of CNY0.35 (USD0.05) for an account renting order and a 3 percent service fee for withdrawing money out of the platform, earning profits directly from account renting transactions, the notarial deed said.

Although it is users who rent accounts, the company established the platform to provide account renting service, which is commonly prohibited in the video industry and violates the principle of good faith and basic business ethics, the court decided.

iQiyi has said clearly in its app service protocol that users cannot transfer, rent, lease, sell or share their accounts with others. Other long-form Chinese video platforms like Youku, Tencent Video and Bilibili also have such user agreements.

Many network operators stipulate in their service protocols that users only have the right to use accounts, but do not own them, and they cannot sell or lease accounts, Zhao Zhanling, a special researcher from the Center for Intellectual Property Studies at China University of Political Science and Law, told Yicai Global.

If users lease accounts to others, it will constitute a breach of contract, and operators generally impose breach penalty, like terminating users’ accounts, Zhao noted.

Membership business is the core revenue source of Chinese video platforms.

Take iQiyi for example. According to its second quarter results, Beijing-headquartered iQiyi posted total revenue of CNY6.7 billion (USD935 million) in the quarter, with advertising revenue of CNY1.2 billion, down 35 percent from a year earlier. Membership service revenue reached CNY4.3 billion, up 7 percent, and accounting for 64 percent of total revenue.But iQiyi’s membership revenue growth is mainly based on price markup. By the end of the second quarter, the number of its paying members fell by 900,000 from a year earlier.

Tencent Holdings’ paying members also fell 2.4 percent from a year earlier or declined 1.6 percent from the first quarter to 122 million in the second quarter, according to the company’s financial results.

As a result, platforms’ control over the membership business has become more stringent.

Tencent sued Huizhou Taozhuo Network Technology in April, saying the Huizhou-based company provided and sold Tencent Video VIP accounts. Tencent was awarded a compensation of more than CNY457,000 (USD63,781) in the first trial.

In March, iQiyi was awarded CNY1 million after filing a lawsuit against Hunan Nanao Network Technology for leasing iQiyi membership accounts to users and directly profiting from it.

Editors: Shi Yi, Peter Thomas