Alibaba Pictures Group, the film studio owned by China’s e-commerce giant Alibaba Group Holding Ltd (NYSE:BABA), announced a new investment fund worth $300 million to expand its operations into the TV and film industry.
Earlier on Monday, the Chinese e-commerce giant said it’s collaborating with Wuhu Gopher Asset Management on the new investment fund called “Hainan Alibaba Pictures Entertainment Industry Investment Fund,” which will concentrate on investment opportunities in renowned companies in the entertainment and television industry. Alibaba said in a statement: “The investment fund will work under the four key pillars: production development, celebrity resources, marketing and distribution, and advanced technology.”
Previously, Alibaba pictures have also made investments in leading Hollywood box office hits like Star Trek Beyond, Mission Impossible-Rouge Nation and Teenage Mutant Ninja Turtles. Similarly, the entertainment subsidiary of Alibaba Group has also partnered with Skydance Media to co-produce and finance box office hits like Flying Tigers, a movie based on an event of World War II. Apart from this, Alibaba’s pictures unit has also invested in several Chinese movies that are yet to be released.
In addition, the fund will target both international and regional investments. According to reports, Alibaba’s film subsidiary will inject about $75 million in the investment fund; the rest of the investment, worth $225 million, will come from Wuhu Gopher.
Zhang Qiang, Alibaba Pictures CEO, said in an official statement: “In recent years, the Chinese entertainment industry, which has mainly been driven by movies, has undergone rapid development.” He further added: “Bountiful investment opportunities and immense room for integration have emerged both upstream and downstream of the industry value chain.”
Alibaba Group, which gained success from its e-commerce business, has rapidly diversified its portfolio and product offerings. As the Chinese economy is witnessing a slowdown and the country’s Gross Domestic Product (GDP) still hangs below 7%, Alibaba’s move to expand its operations into other businesses may prove to be wise one. Though the Chinese company is still new to the film industry, it is keen to expand and make a name for itself in the highly competed and lucrative industry.
In December 2015, the Chinese e-commerce giant and Tencent Holdings, China’s leading internet services provider and online games maker, made a joint bid to purchase a leading film studio and distributor Bona Film Group Ltd, which financed this year’s Hollywood science fiction movie, “The Martian” and Wong Kar-Wai’s 2013 martial-art hit, “The Grandmaster.” Based in Beijing, Bona also has operations in production, distribution and theater.
Due to the highly competitive environment, Chinese internet giants are turning towards other segments to spur growth in their operations. Investments in entertainment and media companies are becoming a trend in China, mainly due to stiff competition and a slump in economic growth.
Recently, Baidu Inc (NASDAQ:BIDU), China’s search giant, also said it is planning to invest about $303 million (2 billion yuan) in several movies through its entertainment unit Baidu Nuomi Pictures. Baidu also said that it aims to invest in 30 movies, which includes; live actions, animated movies and youth-oriented movies. In addition, Baidu Nuomi Pictures said it has already generated around 30 billion yuan from investing in about 100 film projects.
In the film industry, Alibaba Group is expected to face stiff competition from leading players in the industry, including its arch rivals Baidu Inc, IMAX China and China Media Capital. However, analysts believe that the Chinese e-commerce giant will find a way to grow and gain a significant market share. We believe it will be difficult for Alibaba to right out conquer the market but the Chinese e-commerce giant is doing well to keep up with its two arch rivals Baidu and Tencent Holdings.