China’s biggest internet companies rush to the entertainment sector

When was the last time you watched a film or TV show that you didn’t access through the web? For many of us, the answer is quite a while ago – in this age of Youtube, Hulu, and Netflix there’s so much entertainment right at our fingertips that there’s often no need to go further. In the developed world, people are ditching cable television in record numbers, and in developing countries the growing middle classes aren’t bothering to pick it up, instead consuming entertainment directly through internet-connected devices from smartphones to smart TVs.

China’s biggest internet companies know this well, and as the internet and entertainment industries grow closer, all of the BAT companies – Baidu, Alibaba, Tencent – have made moves to get into the entertainment business.

BAT goes to bat for entertainment

The most recent of these is Tencent’s latest and most significant move. Late last week, the company announced at a Beijing press conference that it is launching its own filmmaking arm – Penguin Pictures. The new film subsidiary will focus primarily on original programming for the web, but it will also invest in a dozen or so feature films each year. This news follows on the heels of a blockbuster summer that saw one of Tencent’s earlier investments in the film industry pay off big time: Monster Hunt, which Tencent partially produced, shattered records and became China’s highest-grossing film ever.

Of course, Tencent’s Penguin Pictures is just the latest addition to the entertainment race. Alibaba has had its own film wing, Alibaba Pictures Group, since last year. Alibaba Pictures has its hands in a different blockbuster from this summer: Mission Impossible: Rogue Nation, which Alibaba co-financed. Alibaba has made other moves into entertainment: it recently launched its own Netflix-style subscription streaming service, and earlier this year it also plunked a bug chunk of change into movie ticketing software. Alibaba even has a crowd-sourced film investing platform.

Baidu’s relationship with the entertainment industry might be slightly more strained – remember that US$49 million piracy lawsuit? – but that hasn’t stopped Baidu from making serious moves in this space, too. In addition to its iQiyi streaming platform – which also produces and is planning to expand on its own original content – it also has a film crowdfunding platform. Baidu has also made a number of investments in the entertainment space, the latest being a US$58 million stake in Hong Kong’s SMI Holdings Group, a theater operator and film and TV production studio.

Beyond BAT

Of course, it’s not just the BAT companies pouring money into the entertainment industry. For example, Letv – which began as a video streaming startup but now has its hands in everything from smartphones to electric cars – has even gotten into Hollywood itself with a US-based filmmaking subsidiary.

Increasingly, the two industries are connected even in instances where a tech company isn’t making a direct investment. Consider, for example, Light Chaser Animation Studios. The company, which hopes to be China’s answer to Pixar, was founded by former Tudou CEO and founder Gary Wang, and has gotten big funding from tech-focused venture firms like GGV Capital.

The battle for the future of China’s entertainment industry should prove fascinating to watch, as this is relatively new territory for all the players involved. Baidu and Tencent already have proven video streaming platforms, and Tencent also has a fair amount of experience with entertainment via the games industry, but none of these companies have a significant history of creating compelling original television or film content. Plus, they’ll be going up against some established entertainment companies that will be moving in the other direction – working to integrate their productions more closely with the internet.

If you had to pick a winner, who would you put your money on?