Xiaomi to buy a stake in Youku, beef up content offerings

Smartphone maker Xiaomi plans to buy a stake in Chinese video portal Youku Tudou. The dollar amount and size of the stake were not disclosed, but the companies said the deal will take place on the open market.

Last week, Xiaomi pledged to invest US$1 billion to beef up its video content offerings. The deal with Youku means the two Chinese tech firms will jointly fund the production and distribution of online films and TV shows.

Apart from its phones, Xiaomi also makes popular set-top boxes and smart TVs.

To keep prices low, Xiaomi sells its devices at or near the cost of production. To make up for it, the company’s strategy involves leveraging apps and media on its MIUI operating system to ramp up revenues. Youku’s large library of licensed video content could certainly play into that effort.

The strategy seems to be working so far. A leaked document obtained by The Wall Street Journal shows Xiaomi’s net profit rose 84 percent last year to US$566 million, and that’s forecast to grow another 75 percent this year.

Youku reports 500 million monthly active users and over 800 million videos watched daily. Its app is the second most popular in China in terms of time spent using it. MIUI has 85 million active users.

Check back here for updates when we hear more about the terms of the deal.

See: Xiaomi clocks $163 million in 12 hours on Singles Day