Chinese Web Giant Baidu Launches Kickstarter-Style Service
The fund taps into the country's need for investment vehicles and its love of movies
Chinese web search giant Baidu has launched its own Kickstarter-style investment fund, Baifa Youxi, to help ordinary investors participate in the funding of big movie projects.
The online fund, which Baidu is launching with Taiwan's Central Picture Corporation, Citic Bank and the Hong Kong law firm DeHeng, will allow investment of as little as $1.63, with yields based on the box-office performance of the projects.
In April, China's largest e-commerce company, Alibaba, which had its massive IPO in New York last week, launched Yulebao, which translates as "Entertainment Treasure," a vehicle similar to crowdfunding that lets thousands of ordinary Chinese become microfinanciers for movies.
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. This kind of fund also taps into China's growing love affair with the movies.
The online giant reckons returns could be as high as 16 percent. Baidu owns majority stakes in two popular Chinese video portals, PPS and iQiyi, and has been working to build up its own content division.
The first project offered to investors is Golden Age — featuring Tang Wei and Feng Shaofeng —which has been flagged as a Chinese version of Gone With the Wind. The fund quickly raised $29.3 million from over 3,300 supporters, which is 120 percent the targeted sum.
"The launch of Baifa Youxi will bring fresh wind to our film industry," said La Peikang, the CEO of state film group China Film. "It creates the platform and an opportunity for creative marketing and film prosperity. It enriches the way users can participate in and enjoy films and narrows the distance to the consumer."
He added: "Combining with Baidu allows production firms and celebrities to understand the consumer better and thereby better meet their needs. It is a good start to build a dream factory for different elites, investors and users."
When it launched its fund, Alibaba was careful to distinguish Yulebao from a traditional crowdsourcing scheme, which is illegal in China and sometimes seen by authorities as a form of pyramid schemes.
Alibaba says Yulebao's investors indirectly invest in the film industry and earn capital gains on insurance and wealth management products.