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China's Baidu, Alibaba, Tencent Move Into Content Creation
(THR) It's not an official animal in the Chinese zodiac, but 2014 was very much the year of the BAT – Baidu, Alibaba and Tencent, that is. And 2015 will probably be another year of the BAT in Hollywood, too, as the tech giants, which the acronym describes, make even bigger inroads into the entertainment business.
Big web companies in China are uniquely positioned to take advantage of providing content when you consider that 60 percent of Chinese consumers watch TV and movies on their cell phones or tablets.
The conditions for expansion are right. During 2014, the industry made progress in fighting piracy. In April, a lot of peer-to-peer (P2P) content sharing sites were shut down and the largest piracy provider, Kuaibo, which runs pirate site QVOD, was closed down and fined.
To most Chinese, Baidu is best known as a speedy search engine, but its iQIYI unit, which has only been in the movie business since July, is building a presence in movies and TV both in China and Hollywood. Anyone attending American Film Market in November would have noticed the iQIYI lanyards, and execs from the company made high-profile appearances at film festivals in Venice, Busan and the U.S-China Film Summit in L.A.
"We really hope to have more cooperation with Hollywood in the future, in two ways – purchasing good content – mostly movies, but also TV shows, and we also want to discuss the possibility of co-producing content, such as adaptations of U.S. content for Chinese market," said Gong Yu, CEO of iQIYI .
In 2015, iQIYI plans to buy distribution rights to more than 1,000 U.S. movie titles to meet swelling demand from its users for Hollywood content, and plans to make seven local films and one Hollywood- style film next year. Over one million users took part in its crowd-funding program for
The Golden Era, a film by Hong Kong director Ann Hui, raising nearly $3 million in three minutes.
iQIYI also inked a $300 million partnership with smartphone maker Xiaomi to buy TV shows and movies.
The best-known of the three BAT companies internationally is Alibaba. Thanks to its $25 billion IPO in September, which made international headlines, the company, which its founder and executive chairman Jack Ma says is "the biggest entertainment company in the world," probably has a war chest of around $16 billion in cash for investments.
Incredible to think that at the end of 2013, Alibaba was best known as an e-commerce site with a cool platform for buying anything you want online. By the end of 2015, it could be a Hollywood studio. The groundwork for this has already been laid. Alibaba's offices in Los Angeles will be headed up by Zhang Wei, while the search is on for content Alibaba can sell to Chinese viewers through its set-top boxes.
Alibaba Pictures was formed in March when it bought a majority stake in Hong Kong-based ChinaVision Media Group, which produces Chinese-language TV shows and movies. The company is headed up by Zhang Qiang, a former senior executive of the state-run China Film Group.
Alibaba Film Group plans to invest in eight to 10 films every year, three to five TV dramas and the same number of web-only dramas. The group's board includes action star Jet Li, who is close to Ma, the former English teacher who founded Alibaba in 1999 and remains its chairman.
Alibaba Film Group has lined up a slate of films with
In the Mood for Love director Wong Kar-wai and also has an agreement with Taiwanese director Giddens Ko. And the company is entitled to 30 percent of the investment return from Stephen Chow‘s blockbuster
Journey to the West: Conquering the Demons.
In April, Alibaba and Ma's Yunfeng Capital paid $1.2 billion for an 18.5 percent stake in the Chinese online video company Youku Tudou. In the same month, Alibaba agreed to purchase a 20 percent stake for $1 billion in the Internet TV company Wasu.
Alibaba also struck a deal with Lionsgate to bring
Divergent and
The Twilight Saga: Eclipse and such TV shows as
Mad Men,
Weeds and
The Royals to China
. Along with the real estate company Wanda, Alibaba is also seen as a potential investor in Lionsgate itself.
Tencent, which has nearly half a billion monthly users for its WeChat social media service and 830 million users for its signature instant messaging service QQ, in 2014 signed a major deal with HBO to make its TV shows and movies available on a broad basis in China for the first time.
During 2014, Tencent also launched a film unit, Tencent Movie Plus, which will aim to make four or five films a year. The first project it is working on will be Nobel Prize-winner Mo Yan’s novel
The Treasure Map, which the company said will be made with input from Hollywood. The focus of Tencent Movie Plus will be on projects based on Tencent’s intellectual property including cartoons, novels and games such as
QQ Race Car, an online race game that has more than three million users.
Last year, Tencent produced an animated series based on its online game
Roco Kingdom, which brought in $24.4 million in box- office revenue. Tencent also struck a deal with Warner Music to distribute stars such as Linkin Park, Bruno Mars and Michael Buble online. In December, the company also announced a deal with Sony Music to exclusively distribute its global roster of stars in China.
It's not just the BAT companies that are making waves in China though.
Youku Tudou set up a film division, Heyi Films, to produce a slate of films for what it said was the country’s first online and offline production company. Heyi is headed up by Allen Zhu, and Youku Tudou CEO Victor Koo. Among its slate of projects is
The Master, produced by Beijing Century Partner Culture & Media Inc.,
Bad Sister directed by Kim Tae-gyun with Ivy Chen, and
Vacation in Paris produced by Universe Entertainment with Louis Koo and Amber Kuo. Heyi Film also plans to adapt five popular web original shows for the big screen, including
Surprise,
Yes Boss! and
Miss Puff.
Sohu.com, which includes online video and media, search, gaming, community and mobile services among its product offering, bought the online video provider 56.com, and said it planned to double its investment in the self-produced content business, as more and more people access content on their mobile phones and 4G starts to make an impact on the market.
The Simpsons made their way over the Great Wall for the first time via a Fox deal with Sohu. The company also signed a content deal with the BBC.
Hou Tao, vp of research group Entgroup said internet companies have three advantages. "First, internet companies have large amount of online literature and games etc which can provide good content and also lower the production fee from the copyright aspect," said Hou.
"Second, many internet companies have video websites, or are themselves video websites. The 'fan effect' from the video website gives a big push to the box office. Third, internet companies are used to analyzing user data. This advantage allows them to know market trends and lower the risk," said Hou.
Guo Fanli, head of research at China Investment Consulting, said internet companies can use big data and users' advance demand, so that they can precisely judge the audiences' preference and interests to tailor and optimize the film production. "For example, a good film can make one billion yuan ($160 million) in the traditional way, but if you operate it through the internet, it can be 1.5 billion ($240 million)," said Guo.
What analysts are asking now is what form the Chinese tech firms' growing might in the entertainment industry will take. The biggest question is how long before the market starts to narrow down the number of players as the sector looks ripe for consolidation with so many similar-type players. The next 12 months will show if it will still be BAT at the end of 2015 or if there will be some other configuration.
