Alibaba bets big on video with $4.2B proposed acquisition of Youku

Proposed buy-out is latest move by Alibaba to get into video. The ecommerce company recently launched a Netflix-like streaming service in China called TBO.

Alibaba today announced it has proposed to acquire China’s top video site company, Youku Tudou. It runs the Youku and Tudou sites, which combine user-generated content with licensed movies and TV series.

Alibaba’s buy-out of Youku values the video site at about US$4.2 billion, according to earliest calculations. No official figure is provided by Alibaba today.

Alibaba took a 18.3 percent stake in the video company back in April 2014, so today’s move sees the ecommerce titan snapping up all the remaining shares that it does not own.

Youku did not immediately respond to a request for comment.

Rush to emulate Netflix

The Alibaba-Youku deal comes amid a battle by China’s top video sites to lure in viewers and attempt to make them pay for premium streaming. Leading rivals include Baidu’s iQiyi, Tencent’s video site, LeTV, and Sohu Video.

Alibaba has its own smart TV OS as well as video streaming offerings. The Youku buy-out will strengthen its video service enormously. Alibaba recently launched China’s first subscription-only service called TBO, which is modelled on HBO and Netflix in the US.

“Digital products, especially video, are just as important as physical goods in ecommerce, and Youku’s high-quality video content will be a core component of Alibaba’s digital product offering in the future,” said Daniel Zhang, Alibaba’s CEO, in a statement.

Back in 2014, Alibaba paid up US$1.22 billion for its initial stake in the NYSE-listed company, coughing up US$30.50 per share. Youku’s share price fell dramatically after that time, hitting a low of US$13.00 earlier this year before regaining. That means Alibaba is paying less this time round – it’s offering up US$26.60 per share, which is a premium on the US$20.41 price when US markets closed Thursday.