Alibaba Group Holding Ltd. is reportedly exploring possibilities for its video entertainment assets as part of its ongoing restructuring efforts, according to sources familiar with the matter.

The Chinese tech giant is currently conducting a strategic review of its video streaming platforms, namely Youku and Tudou. The company is considering various options, one of which involves merging these assets into Alibaba Pictures Group Ltd., a Hong Kong-listed company, in order to enhance its business scope.

Video platform for Alibaba?

This review of video platform assets aligns with Alibaba’s broader plan to restructure its operations, aiming to stimulate growth and establish separate leaders within different business sectors such as e-commerce, media, cloud services, and logistics. The company recently made unexpected announcements regarding its restructuring plans.

Alibaba Group made headlines last month with the appointment of a new CEO, Daniel Zhang, who replaced the company’s long-serving chief.

Chinese Market

In the competitive Chinese market, Youku, Alibaba’s video streaming platform, faces strong competition from iQiyi Inc. (owned by Baidu Inc.) and Tencent Holdings Ltd. These major players have historically invested heavily in acquiring content and producing original series, taking cues from Netflix’s successful strategy to gain market share and outpace emerging competitors.

However, this aggressive approach led to a price war that proved unsustainable, causing significant financial losses for all parties involved. iQiyi has since shifted its focus towards attracting more subscription-based viewers through high-quality, selective content, aiming to reverse its years of losses, according to CEO Gong Yu’s interview in May.

It’s important to note that discussions regarding the future of Alibaba’s video platforms, including the possibility of separate listings or abandoning the deal altogether, are still in the early stages. Alibaba and Alibaba Pictures have yet to provide official comments on the matter.

According to its official website, Alibaba Pictures is engaged in various aspects of the entertainment industry, including content production, promotion, distribution, cinema ticketing management, and data services.

The company has played a significant role in the Chinese film industry, producing blockbuster movies such as “Wolf Warrior 2,” “The Wandering Earth,” and “Dying to Survive,” which achieved high box office revenues. Additionally, Alibaba Pictures made investments in internationally acclaimed films like “Green Book,” which garnered several awards including Best Picture, Supporting Actor, and Original Screenplay at the 2019 Oscars.

Alibaba Pictures’ stock has experienced a decline of approximately 45% over the past year, resulting in a market valuation of approximately $1.5 billion.

Two principal competitors

Youku and Tudou, once fierce competitors, merged through an all-stock deal valued at around $1 billion in 2012.

Subsequently, Alibaba acquired the US-listed Chinese video site in 2016 for $5.1 billion. While Youku ranks as the third-largest long-form online video platform in China in terms of monthly active users, it has been facing increasing challenges from short video apps like Bytedance’s Douyin.

In the first quarter, Alibaba’s digital media and entertainment business managed to narrow its losses, primarily due to Youku’s investments in content and production capabilities.

The segment reported a loss before interest, taxes, depreciation, and amortization of approximately 1.1 billion yuan ($152 million) in the three months ended March 31, compared to a loss of around 2 billion yuan for the same period in 2022.

Is the partnership with Microsoft coming to an end? Netflix has focused on new solutions for more targeted advertising. As highlighted during meetings with brands and agencies at the latest Cannes Lions International Festival of Creativity.