From Netflix to Hulu to Amazon Prime to Youtube, streaming videos has quickly become one of the more popular ways to view primetime content. As cable prices continue to soar, there are many who have started cutting the cord in lieu of these online services. It is not a trend exclusive to the U.S., as Alibaba Group Holding Ltd’s giant investment in Youku Tudou Inc is proof of interest by the international community.
Alibaba is one of the largest internet companies in China, and has made this deal as a move against their greatest competitor Tencent Holdings Ltd. They are investing $1.2 billion with Youku, which brings their recent investment spree to $4 billion in just the last six months. Combined with Yunfeng Capital, the investment firm will be paying approximately $30.50 per American Depositary Receipt (something like a share). In addition, Alibaba CEO Jonathan Lu will join Youku’s board. This will give the two companies an 18.5% stake in Youku.
It is an investment that will most likely pay off, for Youku is the most successful version of Google’s Youtube in China. In a public statement Lu said, “Alibaba’s investment will strengthen Youku Tudou as China’s largest online video platform and further differentiate our services and user experience.” It is rumored that Alibaba is also interested in releasing a public offering in the U.S. which could raise as much as $15 billion in revenue.
Just like American youth, Chinese youth have been migrating from cable TV to on-demand internet services. Therefore it shouldn’t be surprising that the money is now flowing heavily in that direction. iResearch released data indicating that online video market sales in China rose 42% in 2013 to $2 billion. With their recent investment, Alibaba will be assuring itself a slice or two of this humongous video streaming pie.