China Home Shopping Giant Alibaba Hails New Entertainment Era

Massive Internet company seeks to align the different elements of the digital economy.

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Courtesy of Alibaba

SHANGHAI — Alibaba, the Chinese home shopping giant that is hatching an IPO of some $150 billion in New York, says it plans to revolutionize the entertainment industry.

The massive company will seek to align the different elements of the digital economy and in the process become one of the top film industry players in China.

“Alibaba is now picking up speed in the digital culture industry,” said Patrick Liu Chunning, head of Alibaba’s Digital Media Group at a seminar in Shanghai on Sunday. “We are absolutely committed to digital media and diversifying the models.”

The company is well placed to do so. Its existing range of activities run from provision of Internet backbone, through e-commerce, to games and mobile music and online booking of movie theater ticket. In the last year Alibaba has also acquired film production company Chinavision, and minority stakes in online video platform Yukou Tudou and internet TV group Wasu Media. These are in addition to existing stakes in Hong Kong’s Media Asia and China’s Huayi Brothers Media.

The company, which is often compared to Amazon or eBay, is expected to launch its own Netflix-like online video offering from July and is currently amassing libraries of content. The servie is expected to kick off with a free trial period, before converting users to a subscription-VoD model.

Liu said that the company had recently also sold out on a second tranche of its crowd-funding product Yu Le Bao.

“Just before the World Cup we raised RMB27.7 million ($4.5 million) from 100,000 investors. This will allow us to finance five movies,” he said.

Liu said that with China’s vast populations of Internet, mobile and tablet users digitally driven companies like Alibaba can reap four different advantages over traditional media players. “Digital is generating big data, which allows us to understand more about users; digital is changing distribution; and it is changing film finance, making it less of a B2B model. Fourthly it is changing the commercial value of movies, by adding new copyright and revenue channels.”

Liu described the Yu Le Bao scheme as a “wealth management product” which offers revenues in excess of 7% per year and which is risk free to investors as it is guaranteed by Alibaba.

Speaking at the same seminar, Bona Film Group chairman and CEO Yu Dong, described Alibaba’s Yu Le Bao as one of the most significant innovations of the past year in the Chinese industry.

“We don’t see ourselves as a content company. We want to take advantage of the huge ecosystem we already have and help companies like Bona, SHanghai Film Group or Kylin provide a wonderful customer experience,” said Liu. “People today don’t just want to buy clothes and food, so we too face the task of reinventing ourselves and will supply cultural and spiritual products too.”