Youku Tudou, China’s leading online video platform, is expanding into financing and screening of original content. Last year, it backed Andy Lau actioner “Firestorm,” while this month it is launching 20 new TV series. On Aug. 28, it announced the kickoff of Heyi, a movie production and investment shingle with a slate intended to capitalize on content it already produces and owns. Fast-moving Youku Tudou already has a New York stock listing (eCommerce collective Alibaba is a major shareholder) and a market value of $5 billion. Speaking with Variety’s Patrick Frater, Youku Tudou founder and CEO Victor Koo spoke of China’s changing entertainment demographics, the nation’s plans to fight piracy and how his eight-year-old online giant has become one of Hollywood’s essential business partners.
Talk about your business model.
Youku Tudou is a hybrid, like combining Netflix and YouTube. Like Netflix, with Youku, which launched in 2005, we syndicate a library of longform content, and create original content. The Tudou model started with user-generated content, but is increasingly becoming about partner-generated programming.
On a monthly basis, we serve about 450 million users on PCs, mobile devices, tablets and, more and more, on larger screens. We started working on advertising in 2008. Our transaction and subscription products began around 2011.
Who are some of your partners?
We syndicate globally, from Hong Kong, Taiwan and Korea. (The company has exclusive partnerships with major content providers across Asia.) Tudou also has an exclusive partnership with TV Tokyo for Japanese anime, and we have partnerships with all the Hollywood studios and TV broadcasters, including cablers AMC and Starz. We also have one with the BBC; “Sherlock” was a big hit for our platform. This is a range of content that the Chinese user has never seen before.
How big is the subscriber base?
We have not disclosed that. Suffice to say, it is a small base, but growing in triple digits year on year.
Why do you feel the need to create original content?
We began producing original content back in 2009 on both Tudou and Youku, and now we are starting to be able to charge for that content — especially franchises that have loyal fans.
The whole online to offline trend is growing. Feature “Old Boys: The Ways of the Dragon,” which was released in April, started as a micro-movie. A lot of (our) Web series and reality shows are now on (China’s) CCTV.
At the Hong Kong festival, we were co-producers of the opening film, “Aberdeen,” which is the third part in a popular movie series. And we (co-produced) Andy Lau’s “Firestorm” with Bill Kong and Edko Films.
How do you work with the Hollywood studios?
Beside (streaming) trailers, we provide box office rankings, a very popular show called “Star Talk,” and a movie ticketing service. Our platform is a one-stop shop, from marketing and promotion through to ticketing. But even in the early days, in 2006-07, when we were mostly carrying shortform video, we became the premier movie marketing platform. Now even more so.
It is important to look at the demographics of Youku Tudou — audiences on computers fall mainly into the 18-35 age group; now because of mobile phones, it is broader, probably 15-45. So with China now the second largest market in the world, with cinema growing very quickly and with a compatible demographic, we see our relationship with both domestic and international film companies becoming closer.
We are also a post-theatrical distribution window, (since) there is no DVD market in China that is not pirated, and there is no HBO or Showtime. Because only a small number of Hollywood movies come to China’s theaters, we have been quite successful working with the studios (getting) early windows — soon after a film shows in theaters in the U.S. — for movies that don’t get theatrical distribution in China.
Some in the industry say that piracy has been eliminated from the major online companies, but that it remains a problem among smaller video players.
There is still piracy among major companies. Last year, there was a cross-industry initiative: Youku Tudou, the MPA, the big film companies like Huayi, Enlight and Wanda, and other online video websites agreed to sue and publicize piracy on (search engine) Baidu and (software firm) QVOD. Those were the two we really went after. Things have improved, but piracy still exists among them. We will work with the authorities, our partners and those companies to improve the situation.
Heyi capitalizes on content you already own. Are you going to become more acquisitive in the film business?
We have not announced plans to buy a movie company, but never say never. Right now, we see ourselves as partners. More co-productions will happen. We are in the movie business now.