(Yicai Global) Aug. 14 -- China has finally set caps on celebrity pay, mandating that performers may not be paid more than CNY50 million (USD7.25 million) per series or CNY1 million per episode after taxes, thanks to the joint efforts of sector companies and relevant government agencies.

The salary caps, which took effect on their June 27 announcement, are rationally set and are based on performers' actual contributions, China's three most influential online video sites iQiyi, Youku and Tencent Video and six leading production companies including Daylight Entertainment said in a joint statement issued Aug. 11.

China's online video sites have grown rapidly in recent years. Many have teamed with production companies to lure more viewers, with several online-only series having more than 10 billion hits each. However, the entire video website sector has been operating at a loss for years, mainly because of persistently high content costs, with celebrity pay making up the bulk of these.

As the only online video platform that has disclosed details, iQiyi's content costs reached CNY4.7 billion in the second quarter of this year, up from CNY4 billion in the previous quarter and almost doubling the CNY2.5 billion in the first quarter of last year.

Efforts should be made to guide production companies to set a reasonable cost structure of TV series and optimize pay distribution mechanism, the State Administration of Press, Publication, Radio, Film and Television, the National Development and Reform Commission, the Ministry of Finance, the Ministry of Commerce and the Ministry of Human Resources and Social Security stressed in a joint notice issued last September.

The salaries of all performers in each movie or TV series should not exceed 40 percent of total production costs, with leading actors receiving no more than 70 percent of the total cast pay and others getting no less than 30 percent, per the notice.

The three video sites have repeatedly called for curbs on exorbitant celebrity pay.

Empresses in the Palace, a popular TV series in 2011, sold for CNY300,000 per episode. However, the price of a similar production has risen 10-fold in just three to four years," Han Zhijie, general manager of Tencent Video's copyright cooperation department, told Yicai Global. "Rising costs are the primary reason, with higher performers' pay being the biggest contributor."

The increase in celebrity pay is largely due to massive market demand and the scarcity of first-tier stars, Han said, adding that upstream content producers should take bold steps to hire and cultivate new performers rather than paying handsomely to employ first-tier stars to avert risks.

Editor: Ben Armour