Alibaba Touts Digital Entertainment Strategy as Quarterly Revenues Miss Estimates

Jack Ma Alibaba - H 2014
AP Images

Jack Ma Alibaba - H 2014

Lower than expected, if strong, revenue growth signals the days of truly sizzling expansion may be coming to an end.

Chinese e-commerce giant Alibaba reiterated its commitment to buying strong entertainment content while also producing its own unique programming, as the group reported lower-than-expected revenues for the fourth quarter.

Alibaba's founder and executive chairman Jack Ma has described his firm as "the world's biggest entertainment company" and he has made no secret of his desire to buy Hollywood content for his set-top boxes and other platforms.

Alibaba's revenue rose 40 percent to $4.22 billion in the December quarter, falling shy of analysts' expectations and signaling that, like the broader Chinese economy, the days of breakneck growth are waning.

Alibaba, which has 80 percent of the Chinese online commerce market and handles more e-commerce than Amazon and eBay combined, saw its shares fall 7 percent in pre-market trading on Thursday.

Among Alibaba's highlights over the past year was its April purchase, with Ma's Yunfeng Capital, of a stake in Chinese online video company Youku Tudou for $1.2 billion.

"Digital entertainment is a very important strategy to us, and we are working very hard and we have already invested in Youku Tudou," said Alibaba's chief operating officer Daniel Zhang during an earnings webcast. "We are working very hard to promote our set-top box and to promote Smart TV by our partners. We believe the living room is a very important channel."

Not mentioned in the earnings webcast was Alibaba Pictures. Alibaba bought a 60 percent stake in Alibaba Pictures, then known as ChinaVision, for $780 million back in March, ahead of Alibaba's mammoth IPO, which helped raise money for the group's efforts to boost its media business.

Alibaba's IPO was worth $25 billion, and the company probably has around $16 billion in cash for investment.

Alibaba Pictures is headed up by Zhang Qiang, a former senior exec in the state-run China Film Group.

Earlier this week, Alibaba Pictures said it could incur losses of up to $77.41 million for fiscal year 2014 because of delays in distribution of some TV shows, falling magazine ad revenues, delays in production and asset-impairment provisions.

In August, the company said the new management had discovered possible financial breaches dating back to before the purchase.

Zhang reiterated the company's commitment to making content.

"Content is very important and we will be very disciplined and selective to purchase unique content as well as to self-produce unique content to give people a very unique experience on our content operation platform," said Zhang.

Alibaba is keen to expand in Hollywood and the group's offices in Los Angeles will be headed up by Zhang Wei.

Also in April, Alibaba agreed to purchase a 20 percent stake for $1 billion in the Internet TV company Wasu.

Also this week, Chinese actor-director Vicki Zhao and her husband, Huang Youlong, bought a $400 million stake in Alibaba Pictures, giving them 9.2 percent of the company.

Alibaba has also tapped top Hong Kong director Wong Kar-wai to produce Alibaba Pictures' debut movie. The movie will be written and directed by Zhang Jiajia, who is popular among young people, and will feature actor Tony Leung.