Beijing’s grip on online investment and third-party payment platforms is tightening and Alibaba Group offshoots Alipay and Yu’E Bao are likely to feel it the most. But Alibaba seems unfazed by the clampdown, so much so that it’s gone ahead and launched another online investment product. This one is called Yu Le Bao, which literally means entertainment treasure.
Through its Taobao mobile app, Alibaba is offering investors the chance to put money into any of four movie projects — Tiny Times 3, Tiny Times 4, Wolf Totem, and Illegal Operation — as well as a game project.
It’s teamed up again for the launch with long-term partner Guohua Life Insurance, and the investments are expected yield an annualized return of 7 percent. That return is just a bit higher than Yu’E Bao’s seven-day annualized payment of 5.47 percent but does not reflect the higher risk of investing in movie production.
Not only is the expected return unattractive, the insurance fund that Guohua and Alibaba provide does not guarantee the fund’s principal and return. That’s why Alibaba has put a cap on the investment amount, limiting subscribers to 200 yuan in each of the movie projects, and 100 yuan in the game. At most, an investor can put 900 yuan (US$145) into the projects, earning around 63 yuan after a year.
So why all the excitement when Yu Le Bao appears to be little more than a gimmick?
Earlier this month, Alibaba put down US$804 million for a controlling stake in game and film content machine ChinaVision Media (01060.HK). The investment followed repeated comments from Alibaba founder Jack Ma that culture will be one of the two biggest things for China in the future. The ChinaVision deal and the latest entertainment funds could be Alibaba’s way of paving a future in the industry.
And Yu Le Bao could be an investment bridge between the public and the cultural industry.
Liu Chunning, president of Alibaba’s digital entertainment business group, reckons that down the track public investors will be able to choose the directors, leading characters or even the ending of a movie.
Liu refered to US-based online video streaming service Netflix more than once during the product launch this week, hinting that the media industry’s future is in big data, mining online information to generate productions with mass appeal.
He sees lots of interaction between investors and production teams as well. According to Alibaba, individual investors in the movie projects will have a range of perks, like tickets to the movie premiere, autographs from the film crews, a chance to visit the set and access to prop auctions. This way, Alibaba can cultivate a huge group of loyal fans even before the movie is released. Watch this space for Alibaba’s first TV show or film made along these lines.
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