Date
20 September 2017
Youku Tudou's business is improving steadily
Youku Tudou's business is improving steadily

Youku Tudou could use some mobile help from Tencent

Tencent (00700.HK) can’t help getting its hand on almost everything in the internet: from e-commerce and online travel agency to mapping service. And now it’s eyeing the online video business.

According to news website NetEase, Tencent plans to inject more than US$300 million plus its QQ {騰訊視頻} video business into Youku Tudou {優酷土豆} (YOKU.US), one of China’s largest online video streaming site, in exchange for a 20 percent stake in the latter.

Tencent has issued a denial, but the style is almost the same as its previous investment in e-commerce site JD.com.

A potential marriage between the two video platforms could result in a win-win situation. Tencent has been pouring a lot of money into QQ, but the site still can’t make it to the top 3. On the other hand, Youku Tudou is feeling the heat from the merged iQiyi and PPS, which is a unit of the country’s biggest search-engine operator Baidu (BIDU.US).

As of January this year, iQiyi and PPS had 94 million monthly users, or 56 percent of the market, while Youku Tudou was lagging far behind with 10.5 million monthly users, according to data from iResearch. What’s worrying Youku Tudou is that the gap with iQiyi and PPS has doubled in just one month, thanks to iQiyi’s exclusive online broadcast rights to the South Korean megahit TV series “My Love From the Star”.

As such, teaming up with Tencent could boost Youku Tudou’s performance in the mobile segment.

This is not the first time that Tencent has set its eyes on the online video streaming sector. The internet giant has acquired a stake in Togic Software {泰捷軟件}, a smart television solution provider which has its own online video streaming app. The two have joined hands in launching a digital TV box called Webox.

If the QQ-Youku Tudou rumor turns out to be true, this will be the third largest deal in the online video segment. The first major acquisition happened in 2012 when Youku announced it had acquired rival Tudou through an exchange of stocks. Another competitor, Baidu, bought internet video platform PPStream in June 2013 for US$370 million and combined it with iQiyi {愛奇藝} which it had acquired in 2012.

Initially, the Youku-Tudou merger was not considered a big success as it had failed to differentiate itself from rivals like iQiyi and LeTV.

But Youku Tudou got a break after it made a foray into movies. The site had co-produced mega movies like “Firestorm” {風暴} and “Up in the Wind” {等風來}. It also revealed this week that it was co-producing with Bona Film Group the crime thriller “Overheard 3” {竊聽風雲3}, starring Sean Lau {劉青雲}, Louis Koo {古天樂} and Zhou Xun {周迅}.

Youku Tudou’s senior vice president Zhu Huilong {朱輝龍} told a media briefing in Hong Kong Tuesday that the group has kicked off its “big movie” strategy {大電影戰略}.

The release of “Firestorm” last year shows how this strategy works. Aside from getting exclusive rights to broadcast behind-the-scene clips, Youku Tudou also invited the movie’s stars to one-on-one interviews on its video platform. After watching the clips, viewers could buy tickets on the same platform. The movie itself garnered 300 million yuan (US$48.2 million) at the box office in just three days of showing.

Other than investing in film-making, Youku Tudou said it will also establish cooperation with South Korea’s biggest TV stations such as SBS, KBS and MBC this year.

COO Dong Yawei {董亞偉} says Youku Tudou will not only buy broadcasting rights from these TV stations but also invest and co-produce variety shows and drama series as well.

But while Youku Tudou’s business is improving steadily, competition with iQiyi and PPS is also mounting. If the deal with Tencent is sealed, Youku Tudou can make use of the Weixin mobile platform to bolster its video site.

– Contact the writer at [email protected]

CG

 

EJ Insight writer

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