By Pucong Han
Columbia Journalism School
Reporter at People’s Daily Online
“We intend to lead the next phase of online video development in
China,” said Victor Koo, founder, chairman and chief executive officer
of Youku. On March 12, 2012, Youku Inc. (NYSE: YOKU) and Tudou Holdings
Limited (NASDAQ: TUDO) announced that they had signed a definitive
agreement for Tudou to merge with Youku in a 100% stock-for-stock
transaction.
Under the terms of the agreement, Youku and Tudou shareholders will
own 71.5% of shares, and shareholders of Tudou American Depository, a
U.S. dollar-denominated equity fund of foreign corporations, listed on
New York Stock Exchange (NYSE), will own the balance. The combined
entity will be named Youku Tudou Inc. According to the press release,
Youku’s ADSs will continue to be listed on the NYSE under the symbol
“YOKU”.
The competition for the Chinese online video market has intensified.
According to Chinalabs, a number of Chinese video sharing sites, such as
56.com, Ku6.com and Qiyi.com have gained 9.05 %, 8.24% and 7.11% market
shares, respectively. However, online video sites are not able to
generate reliable revenues except through advertising. Youku derives all
of its revenues from online advertising services.
Tudou filed a prospectus form – publicly traded companies are
required to file this form to disclose information – with the U.S.
Securities and Exchange Commission in August 2011.
According to its summary, Tudou typically enters into advertising
contracts with third-party advertising agencies. “We pay agency fees to
third-party advertising agencies that purchase our advertising services
and recognize revenues net of these agency fees.”
Youku has suffered losses since its initial public offering in 2010.
Youku had a net loss of 204.68 million Yuan (US$ 31.01 million), while
Tudou suffered a net loss of 347.4 million Yuan (US$ 52.6 million) in
2010. The net loss continued into the 2011 financial year. According to
unaudited 2011 financial results, Youku reported a net loss of 47.474
million Yuan (US$ 7.445) for the third quarter, which ended September
30, 2011.
Besides continued losses in the Chinese video market, the new merged
Youku Tudou Inc will have about 51% of market shares, according to
Chinalabs. “Youku Tudou Inc. would establish a clear and dominant
leadership position in China’s online video sector and become one of the
largest Internet properties in China,” said Koo.
“Small and medium size video sites will face competitive pressures as
a consequence,” commented Yunting You, a lawyer with the Debund Law
Office in Shanghai.
Tudou, the largest online video-sharing platform presents
user-generated videos and professional content, such as movie clips, TV
series and music videos, while Youku offers a combination of licensed
professional content, user-generated content and self-produced web video
content. This merger will create the country’s largest online
video-sharing platform and reduce the cost of licensed professional
content.
“The greatest assets of Internet companies are users, teams and
brand,” said Yongqiang Gu, chief executive of Youku. “With these three
assets, reaping revenues and profits is just a matter of time.”
Both Youku and Tudou have started to extend their video services and
content offerings to mobile platforms. According to the prospectus form
filed in May 2011, Youku intends to develop and introduce products and
services for and on various media platforms, such as mobile phones and
tablet devices.
Tudou has worked closely with China Mobile as well as other regional
operators, and mobile and handheld device manufacturers to extend its
video services to mobile users since 2009.
According to the prospectus form filed in August 2011, Tudou begins
to generate revenues in January 2010 from its mobile video services.
According to the form, Tudou had an aggregate of approximately 15.8
million users with a total of approximately 27.7 million video views in
2010 and an aggregate of approximately 15.1 million users with a total
of approximately 27.2 million video views for the six months ending June
30, 2011.
“Youku and Tudou share a vision for the future of online video in
China and how to deliver the best user experience possible,” said Gary
Wang, founder, chairman and chief executive officer of Tudou.
(Pucong Han is an intern reporter at People’s Daily Online. He is
from Columbia Journalism School. Pucong can be reached at:
puconghan@gmail.com)
This story has been published at: http://english.peopledaily.com.cn/90778/7770042.html
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