Alibaba is reportedly reviewing its video entertainment assets Youku and Tudou
Alibaba's digital media and entertainment business has been looking up recently, partly thanks to Youku.
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The backstory: Youku and Tudou were once popular rival video streaming platforms in China, similar to YouTube. Then the two companies merged in 2012 in an all-stock deal worth US$1 billion. In 2016, Chinese giant Alibaba bought out the US-listed Youku Tudou. Youku is China’s third-largest long-form video platform at the moment in terms of active monthly users. But it’s still competing with similar platforms like Bytedance’s Douyin, iQiyi and Tencent.
More recently: Alibaba's digital media and entertainment business has been looking up recently, partly thanks to Youku. In the first quarter this year, it reported a loss of around 1.1 billion yuan (US$152 million), which was still an improvement compared to its 2 billion yuan (US$304 million) loss a year before.
In a strategic move, Alibaba restructured its operations in March, dividing the business into six units, each with its own CEO and board of directors. Three of its businesses, Cainiao (Alibaba's logistics arm), Freshippo (its grocery chain) and Alibaba's Global Digital Commerce Group are reportedly the first units getting ready to launch initial public offerings (IPOs).
The development: Alibaba is now reportedly brainstorming what to do with its video entertainment assets as it continues this restructuring. So that includes a thorough review of video streaming platforms Youku and Tudou, according to anonymous insiders. One possible move the firm is considering is merging these assets with Alibaba Pictures, its film entertainment division listed in Hong Kong, to give it a boost. This arm does everything from producing and promoting movies to managing cinema ticketing and data services. The sources said that nothing’s set in stone yet, and Alibaba could also consider some other options, like separate listings for the platforms.
Key comments:
“Our digital media and entertainment business (such as Youku) brought in a state-owned multimedia entity as a minor strategic investor for a consolidated entity,” said Alibaba in its fiscal year report released in July.
“At 24 years of age, Alibaba is welcoming a new opportunity for growth,” said Daniel Zhang, Alibaba CEO and chairman, in a statement in March. “The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready.”
“The innovative plan to split up its businesses, we assume has had some kind of blessing from the authorities,” said Gary Dugan, CEO at the Global CIO Office, when Alibaba announced the restructuring. “In which case it will be seen as an elegant solution for unlocking the value inside the business.”
“Overall sentiment on China is low now as geopolitical tensions continue to weigh and it may be difficult for IPO or spin-off activity to pick up momentum in such an environment,” said Marvin Chen, an analyst with Bloomberg Intelligence, in April. “While Alibaba stock may remain volatile, downside may be limited as valuations approach single digits again.”
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