Alibaba is reviewing its video platform assets and is also planning restructuring to boost growth while creating separate entities for video streaming platforms.
According to sources familiar with the matter, Chinese tech giant Alibaba is currently exploring options for its video streaming and entertainment platforms – Youku and Tudou. The latest development comes as part of Alibaba’s plan to revamp its structure.
Sources familiar with the matter said that the company has been conducting a strategic review of its two video streaming platforms. One of the options under consideration is injecting the assets into Alibaba Pictures Group Ltd. and thus bolstering the business scope of the Hong Kong-listed company.
Alibaba is reviewing its video platform assets while also planning a restructuring to boost growth. They aim to create separate leaders for different businesses like e-commerce, media, cloud, and logistics. Last month, the company made unexpected changes in its leadership by replacing its chief Daniel Zang, who had been with the company for eight years.
In China, video streaming platform Youku has been competing against Baidu Inc.’s iQiyi Inc. and Tencent Holdings Ltd. The rivalry has been pretty intense with each of these operators spending billions of dollars for unique content hosting original series. They seem to be following Netflix’s playbook of gaining market share and overwhelming other startups.
However, this approach triggers a price war that has proved unsustainable leading to losses for companies. Thus, iQiyi has shifted focus to boosting subscriptions with top-notch content as the firm looks to reverse years of losses.
Sources told Bloomberg that deliberations are at an early stage and Alibaba could be exploring other options including not proceeding with any deals or separate listings from the video platforms.
Alibaba Pictures and Its Market Dominance
According to its website, Alibaba Pictures is engaged in various aspects of the entertainment industry, including content production, promotion, distribution, cinema ticketing management, and data services. They have been involved in the production of successful movies in China like Wolf Warrior 2, The Wandering Earth, and Dying to Survive. Additionally, they made an investment in the movie Green Book, which received several awards at the 2019 Oscars.
Over the past year, the shares of Alibaba Pictures have decreased by approximately 45%, resulting in a market valuation of around $1.5 billion for the company.
Once arch-rivals, Youku and Tuduo merged in 2012 in a $1 billion all-stock deal. Later in 2016, Alibaba bought out the US-listed Chinese video site in a $5.1 billion deal. Youku is currently China’s third-largest long-form video platform, in terms of monthly active users. However, short video apps such as Bytedance’s Douyin have been posing mounting challenges to Youku in recent times.
But Youku’s investments in content and production capabilities have helped Alibaba narrow its losses for its digital media and entertainment business.
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