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Alibaba Pictures Group’s Losses Hit $141 Million

Blaming an ocean of red ink on increased marketing expenses, Alibaba Pictures Group reported Friday that losses exceeded revenues in 2016.

APG, the films division of Chinese e-commerce giant Alibaba, said that calendar-year revenues had increased from $38.1 million (RMB263 million) to $131 million (RMB904 million). But its consolidated losses doubled from $71 million (RMB490 million) to $141 million (RMB979 million).

Sales and marketing expenses for 2016 were RMB1.08 billion, compared with approximately RMB111.9 million in 2015, primarily for marketing to encourage moviegoers to use the Tao Piao Piao online ticketing platform. The company’s administrative costs also grew from RMB278 million to RMB720 million as its staff numbers swelled from the acquisitions of Tao Piao Piao and film finance unit Yulebao. APG said Tao Piao Piao is now connected to 6,000 cinema complexes and that its revenue base “expanded gradually” in the second half of last year as the business model matured.

APG’s production business also saw losses increase, as some projects, which the company did not identify, fell below box-office expectations. Chinese titles released in 2016 included “Soul Mate” and “Ferry Man,” while its Hollywood titles included “Teenage Mutant Ninja Turtles: Out of the Shadows” and “Star Trek Beyond.”

In this year’s pipeline are romantic comedy “Ao Jiao Yu Pian Jian,” to be released in April, and “Once Upon a Time,” for release in summer. Other major projects in development include game adaptation “Gujian Qitan 2,” which will be made as a feature film and a TV series.

Following the arrival of Yu Yongfu as chairman and CEO in December, APG says it will increasingly focus on made-for-Internet content.

During 2016, APG invested a total of $507 million (RMB3.25 billion) in convertible bonds and equity stakes in exhibition chain Dadi Cinema Group, producer and distributor Bona Film Group, film financier Hehe Film, Steven Spielberg’s Amblin Partners, and in a newly launched investment fund.

The company warned in February that it would post major losses. But publication of the results had little immediate impact on the its share price, which was unchanged at 11.30 a.m. Friday, local time in China. At HK$1.40 per share, the company has a market capitalization of US$5.11 billion (HK$35.3 billion).

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