China's Youku Tudou Launches Film Division

Victor Koo 2011

The Internet video giant's newly formed Heyi Film Inc. is described as the "first online and offline film company"

China’s biggest online video company, Youku Tudou, has announced the formation of a film division to produce a slate of films for what it sees as the country’s first online and offline production company.

Heyi will be a wholly owned subsidiary of Youku Tudou and will be headed up by Allen Zhu, CEO of Heyi Film and senior vp of Youku Tudou, and Victor Koo, chairman of Heyi Film and chairman & CEO of Youku Tudou.

Among the projects the group will work on: The Master, produced by Beijing Century Partner Culture & Media Inc.; Bad Sister, directed by Kim Tae-gyun with Ivy Chen; and Vacation in Paris, produced by Universe Entertainment with Louis Koo and Amber Kuo.

Heyi Film also plans to adapt five popular web original shows for the big screen, including Surprise, Yes Boss! and Miss Puff.

“Youku Tudou has helped transform how media and entertainment-related content is distributed and marketed since our inception. We are stepping up the cooperation we have with the leading international studios as well as the domestic studios,” said Koo in an interview with THR.

Koo said that he thought there would be more revenue streams for Hollywood and domestic movies in China as the market grew in sophistication.

“In the U.S., the revenue streams for movies are multiple — domestic, international, post-theater, ancillary products. In China it’s still domestic box office, period, because of piracy. Post-market is very small. We think this is going to start to change,” he said.

Zhu said that the group's relationship with Hollywood had blossomed since it started cooperation in 2011 on Inception.

“We have performed very well in this area in the last three years and exceeded the minimum guarantee for the studio. In our latest earnings announcement we disclosed that our premium subscription service grew 379 percent. It’s profitable. Three years ago our daily revenue was less than 1,000 yuan ($162.80) from the service. Yesterday’s figure was one million yuan ($162,800) — and we still don’t think it’s enough,” Zhu told THR.

Lee Yong-kwan, director of the Busan International Film Festival, will serve on its board as an independent director.

“As a continuation of Youku Tudou’s effort to build a multi-screen media and entertainment ecosystem, Heyi Film will leverage the big data generated by Youku Tudou’s over 500 million multi-screen users to produce films to the tastes of the Chinese audience in the multi-screen age, and improve film marketing and distribution,” the group said in a statement.

Heyi has three initiatives to incubate content IP, scale up content from micro-movies to silver screen movies, to discover and grow film talents and to grow fan communities that can support films and new consumer monetization model.

Tech giant Alibaba has a 16.5 percent stake in Youku Tudou.

8:00 a.m. This story was updated to include quotes from an interview with THR.