Alibaba's Movie Unit Books $54 Million Net Loss

Illustration by: Lars Leetaru

Alibaba Pictures has a troubled year, but its cash-rich Chinese tech giant parent company says it is committed to the movie business.

Alibaba Pictures, the film studio owned by Chinese tech giant Alibaba, had a rough year.

Alibaba's flagship entertainment company, which is listed on the Hong Kong stock exchange, racked up a net loss of $53.56 million in 2014, down from a profit of $24 million a year earlier.

The group saw revenues of $16.33 million during the year, down from $45.1 million in 2013, with income coming, in part, from stakes in Peter Chan's Dearest and Ning Hao's Breakup Buddies, as well as the TV drama Bayonet Hero.

Alibaba, in common with other big Chinese tech companies Tencent and Baidu, has adopted a slightly scattergun approach to the entertainment industry.

Last year, Alibaba signed a deal with Lionsgate to offer its titles in China, including Divergent and The Twilight Saga: Eclipse and TV shows such as Mad Men, Weeds and The Royals. The movies and TV shows are available through the Lionsgate Entertainment World (LGEW) service, a subscription streaming service for mainland China that will be available exclusively through Alibaba's set-top box.

In April, Alibaba and founder and executive chairman Jack Ma's Yunfeng Capital paid $1.2 billion for an 18.5-percent stake in the Chinese online video company Youku Tudou. In the same month, Alibaba agreed to purchase a 20-percent stake for $1 billion in the Internet TV company Wasu. It also has a deal with Enlight.

Soon after Alibaba bought control of ChinaVision Media Group to form Alibaba Pictures in June, it discovered various accounting irregularities, relating to tax misstatements over the purchase of art works and TV copyrights, as well as certain TV drama production costs. In August, Alibaba suspended the unit's shares and issued a profit warning.

It is not all bad news with Alibaba's entertainment businesses, however. The group is involved in a slate of films to be produced by Hong Kong filmmaker Wong Kar-wai, including Bai Du Ren, which will be directed by the novelist Zhang Jiajia and features star Tony Leung in the lead. The company is also investing $16 million in Jackie Chan's Yaolai film and TV company over the next three years.

Alibaba sought to reassure investors about the unit's long-term future.

"As for the long-term vision, Alibaba Pictures, as the flagship unit of Alibaba Group’s entertainment business, will fully leverage the Alibaba Group ecosystem. It will make good use of Alibaba Group’s online specialisms and resources for the content creation, production, investment and distribution of films and television dramas," it said in the regulatory statement.

Alibaba will not seek to maximize profits "in the foreseeable future and will not compromise its long-term customer interest and operating strategy in favor of short-term interests."

Alibaba Pictures would be better integrated with the overall group's resources, and this included the exploration of a user-demand-oriented e-commerce customization model through the Internet and big data.

There would also be deployment of O2O (online to offline) film-related business in ways such as conducting promotion and marketing activities on the parent's e-commerce platforms.