China’s Alibaba Launches Crowdfunding-Like Service for Film Investment
China's largest e-commerce company, Alibaba, took its first tentative steps into the movie business on Tuesday with the launch of Yu Le Bao, a vehicle similar to crowdfunding that lets thousands of ordinary Chinese become micro-financiers for movies.
Under the Yu Le Bao scheme -- which translates as ‘Entertainment Treasure’ -- would-be financiers can spend between 100 yuan ($16.13) and 1,000 yuan ($161.3) to invest in popular films. The scheme also allows investment in games.
It’s proving a big hit. So far, more than 240,000 users have signed up to invest using smartphone apps via Alibaba's mobile Taobao platform -- a sizable number for two days of operation.
Investors in China are always on the lookout for new vehicles. The stock market is tightly controlled, and the real estate market has become expensive, plus ordinary Chinese are generally not allowed to invest overseas.
“I am going to put some money in Yu Le Bao, then change my ID on (microblogging service) Sina Weibo to ‘famous film producer’,” wrote one new investor.
Another wrote: “I spend 100 kuai and then I can proudly tell (actress) Yang Mi, 'I am one of your investors, did you know?'”
On the first day of the scheme’s operation, more than 180,000 would-be Chinese Harvey Weinsteins had put $1.16 million (7.2 million yuan) into the next installment of the popular Tiny Times series; Sun Zhou’s Impossible had raised $740,000 (4.6 million yuan) from 130,000 investors; and the Jean-Jacques Annaud-directed Wolf Totem had raised $660,000 (4.09 million).
The limit on the first round of funding is $11.77 million (73 million yuan) and so far it has raised an estimated $2.5 million.
Each individual investor is allowed to buy a maximum of two plans from the available list of projects and investors have been offered an interest rate of 7 percent on their investment.
The projects will concentrate on movies for young people born in the 1980s and 1990s, Alibaba said. A number of major TV and movie companies have approached them since the project began, the company said.
China’s box-office sales grew 27 percent last year to $3.6 billion.
While these are its first steps into the movie funding business, Alibaba last month bought a controlling stake in ChinaVision Media Group for $804 million, which gives it TV and movie content, as well as access to games and even English Premier League football.
Alibaba, founded by Internet tycoon Jack Ma, has been valued at between $150 billion and $200 billion and is widely expected to go for an initial public offering soon in New York, which would make it bigger than Facebook.
There are skeptics. The China Securities News says there is a lack of transparency about how the money is invested and where it goes, and that it is not clear enough for people to understand.
There have also been rumblings that the country’s central bank, the People’s Bank of China, is considering ways of capping payments handled by online firms like Alibaba and its biggest rival, Tencent, although nothing has happened yet.
Alibaba has been careful to distinguish Yu Le Bao from a traditional crowdsourcing scheme, which is illegal in China and sometimes seen by authorities as a form of pyramid scheme.
Alibaba says Yu Le Bao’s investors indirectly invest in the film industry, and earn capital gains on insurance and wealth management products.