It was a good day for Xunlei. The Chinese online video services provider rose quickly after going public on the NASDAQ Tuesday, ending its first full session up 26 percent. Shares gained a further 2 percent Wednesday.
The company’s biggest selling point is no doubt its biggest shareholder, Chinese handset startup Xiaomi. Investors generally expect the two to team up on new projects down the track.
But it wasn’t always this easy. Xunlei’s road to listing has been bumpy and it failed to attract much interest until it made a name for itself in premium download services for subscribers. Membership fees accounted for over 60 percent of the group’s total revenue in the first quarter this year.
And there could be more trouble ahead. Xunlei pulled reams of popular US movies and TV shows from its platform this April, citing “related policies reasons” that probably had a lot to do with its US listing.
The group has also signed a deal with the Motion Picture Association of America, promising to implement a content recognition system so that all content on the platform is properly licensed, and to educate users on the effects of online copyright infringement.
A lot of Xunlei’s members were furious at the changes and have been demanding a refund, according to National Business Daily. This raises the risk that the group’s income from membership fees will drop in the next few quarters.
Another worry is Xunlei’s advertising revenue, which fell 37 percent year on year in the first quarter, after a 22 percent drop in full-year advertising revenue. The number of advertising clients has also shrunk from 399 to 103, according to the research institute iResearch. The weakness could reflect a decline in traffic since its copyright policy switch.
But Xunlei still has Xiaomi’s support and the two have already found ways to scratch the other’s back. For one, Xunlei has opened up its cloud accelerator technology for Xiaomi. In return, Xiaomi is pre-installing Xunlei’s products such as Xunlei Kankan and Xunlei Download on its smartphones and tablets, allowing the online video platform to easily tap into Xiaomi’s users. And that’s no small number given that Xiaomi sold nearly 19 million handsets last year.
Xunlei founder Zou Shenglong said there’s also room for the two to collaborate on Xiaomi’s operating system MIUI and its internet TV box. No wonder then that Zou is confident Xunlei can push deeper into the mobile internet and smart home markets.
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