Video web sites Youku and Tudou plan to merge
March 29, 2012 Category Uncategorized
Youku, China’ largest video site, is planning a merge with Tudou to establish a new company, Youku Tudou, based on a stock-for-stock transaction. Youku will have a 71.5% stake in the new company and Tudou will take the rest. The merger is expected to be completed in the third quarter of this year. Independent industry watcher Xie Wen said: “It is a clever move for both sides to reduce the cost of competition and further expand their advantages in the sector.” Victor Koo, Founder, Chairman and CEO of Youku, said: “Youku Tudou Inc will establish a clear and dominant leadership position in China’s online video sector and the combination will lead to improvement in the industry sector.” Koo will become CEO and Chairman of the new company, and Gary Wang, Founder, Chairman and CEO of Tudou, will take a position on the board. The merger is valued at USD1.04 billion, according to Thomson Reuters, making it the biggest Chinese internet deal by stock swap on record. The two sides have long engaged in conflicts over content. The merger will be a blow to smaller competitors in the market, including Sohu and Tencent’s video divisions. At the end of last year, Youku had a 21.8% share of the market and Tudou 13.7%, Analysys International said. Online video sites are still trying to turn a profit despite remarkable growth in advertising income. Both Youku and Tudou were still in the red as of the fourth quarter last year, the Shanghai Daily reports. Tudou reported a net loss of CNY511.2 million last year, and Youku reported a net loss of CNY172.1 million. Youku said its fourth-quarter net loss had widened 32% from the same period a year earlier to CNY49.6 million. Revenues doubled to CNY303.9 million in the quarter. On March 1, Tudou reported a CNY148.9 million net loss for the fourth quarter on a 70% jump in revenue. Last year, online video advertising revenues in China grew 123% to CNY4.84 billion, but the pace of growth is forecast to slow to 83.9% this year and to 33.6% in 2014, according to Analysys. Zhang Fan, Online Video Expert with Analysys, said: “The deal will hugely reduce the copyright cost pressure for them.” Tudou will retain its brand and separate website as its content and users differ from Youku. Tudou has a stronger focus on user-generated content and social networking, similar to YouTube, the Financial Times added. “But the merger is just the first step. They have similar user groups, but Tudou is more grass roots and has more self-generated content. They will have to deepen cooperation or the merger will be meaningless,” said Xie Wen, former Yahoo China President. The number of internet users who watch videos online reached 325 million as of December 31, according to the China Internet Network Information Center (CINIC).
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