Alibaba Group Holding Ltd (NYSE:BABA) and Tencent Holdings Ltd (OTCMKTS:TCEHY) are expected to reap major benefits from the rapidly growing Chinese online video market.
Alibaba, Tencent and Baidu Inc (ADR) (NASDAQ:BIDU) the major players that have invested in China’s online video industry. Analysts from JPMorgan Chase & Co. (NYSE:JPM) have shared positive sentiments about the industry due to the fact that it has been shifting towards the production of original content. The analysts believe that the video monetization efficiency in the market is three times higher than that of the ad model. They thus raised the operating profit expectation of the two Chinese firms. However, they are still treading with caution especially Baidu’s video division.
Competition in the Chinese online video market is growing
Baidu, Alibaba and Tencent have been fiercely competing in the Chinese online video market. However, things have been going so well in the industry that other players are looking to get a slice of the pie. Wanda cinema which is a subsidiary of Chinese firm Dalian Wanda is looking to get in on the action by launching its own content streaming website.
Wanda plans to launch its content streaming website this year though the official launch date was not revealed. It will also launch a new ticketing platform as revealed by Wanda Cinema Line president John Zeng.
“We will be launching the Mtime Online Cinema this year. Because there are a lot of video technology, copyright issues, and business model problems, we can’t just launch a simple app, so we have to spend a relatively long time on the planning. As for movie tickets, we will also have our own new sales platform,” said Zeng.
The entry of a new content streaming service means more competition for Alibaba, Baidu and Tencent. However, the fact that the market is still young and the limited number of players means there is a lot to expect. There is a lot of positive expectation from the online video industry especially because it is rapidly becoming the main source of entertainment as subscribers abandon cable TV in favor of online streaming.
Alibaba stock closed the latest trading session on Tuesday at $124.02.
