China's Alibaba May Be Readying Major Hollywood Assault

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After its record-breaking IPO, e-commerce giant will make building a bigger film business a priority, experts say

Alibaba’s massive IPO will give a major boost to its plans to expand into the film business, with the Chinese e-commerce giant expected to focus on a move into Hollywood as part of its growth strategy.

Analysts say once the company has finished the work of launching the world’s biggest stock market listing, the industry can expect a major push into movies. Company founder Jack Ma, a huge fan of Forrest Gump, has made it clear he sees a future for Alibaba in entertainment.

“Alibaba has made some investments already in the entertainment industry, including [the acquisition of] a stake in Youku Tudou," independent e-commerce analyst Li Chengdong tells The Hollywood Reporter. "After the IPO, Alibaba will be so deep-pocketed that it is able to lay out the whole industry chain and make forays into all sorts of businesses."

Li predicts that Alibaba will put more emphasis on developing good content, using its vast capital to buy intellectual property from Hollywood, as well as make more high-quality domestic movies.

“With sufficient money at hand, everything is possible for Alibaba. It is currently very focused on entertainment as it needs to be somewhat entertainment-orientated to grab public attention," says Li. "My guess is Alibaba will bring more and more Hollywood stars to China to attend its events, make films and appear in commercials."

This could also involve a focus on co-productions with Hollywood studios. One of Alibaba’s biggest investors, Japan’s SoftBank, is reportedly already talking to DreamWorks and other studios.

The company has certainly been active in the entertainment business as part of a $5 billion spending spree ahead of the listing.

The Chinese entertainment market is attractive to a company like Alibaba, which has huge penetration through its e-commerce units. China’s box office is on track for $5 billion this year, by some estimates, still growing strongly.

Advances in Internet technology and the coming of age of various forms of technology are transforming the traditional channels of promotion and distribution in the country and reforming such upstream sectors as financing and production, all of which put Alibaba in a good position to expand into entertainment, say observers.

In April, Alibaba bought a stake of nearly 20 percent in leading Chinese online video company Youku Tudou.

In July, it signed a strategic collaboration agreement with Lionsgate to offer its titles in China, including Divergent and The Twilight Saga: Eclipse and such TV shows as Mad Men, Weeds and The Royals.

In the biggest push to build its own entertainment business, Alibaba in June bought 60 percent of ChinaVision Media Group in Hong Kong for $804 million and renamed the company Alibaba Pictures Group Ltd. It then poached Zhang Qiang, second in command at China Film Group, to run the new production studio.

Alibaba Film Group plans to invest in eight to 10 films every year, three to five TV dramas and the same number of web-only dramas. The group's board includes action star Jet Li, who is close to Ma, the former English teacher who founded Alibaba in 1999 and remains its chairman.

Alibaba Film Group has lined up a slate of films with In the Mood for Love director Wong Kar-wai and also has an agreement with Taiwanese director Giddens Ko.

And the company is entitled to 30 percent of the investment return from Stephen Chow‘s blockbuster Journey to the West: Conquering the Demons.

It recently discovered accounting irregularities at the film unit, which have cast a shadow over its entertainment industry ambitions, but they are not seen as a long-term impediment to major expansion, more a reminder to the company to make sure it does its due diligence.

Alibaba has also set up a film investment fund called Yuebao, which is similar to crowdfunding but different enough not to fall foul of Chinese regulations.

Another independent commentator on online issues, Yi Fanghan, said entertainment industry people can expect Alibaba to move to buy other film companies, either by buying stakes or buying them outright, and also to try and produce its own movies.

“Alibaba will start to create content or ideas for films from grassroots people and connect with Internet finance. It will be good for them to produce films, which reflect Internet culture,” Yi said, quoted on sootoo, a social media and news website about online matters.

This summer, Ma spelled out the importance of entertainment in Alibaba’s future strategy when he spent $192 million on a 50 percent stake in Chinese soccer club Guangzhou Evergrande despite happily confessing to knowing nothing about football.

“We're not investing in [soccer], we're investing in entertainment,” Ma said at the time. “Alibaba's future strategies are health and entertainment.”

Twitter: @cliffordcoonan