Alibaba to launch SVOD service in China's competitive, $6B OTT market

Alibaba Group Holding Ltd., the global counterpart to e-tail giant Amazon, is adding subscription video on demand (SVOD) to its expansive fold, with plans to launch Tmall Box Office (TBO) in China within two months.

If the name sounds familiar, it's because Alibaba is unabashedly referencing popular U.S. service HBO (Home Box Office) in a quest to be both a premier movie provider and a go-to streaming service similar to Netflix.

Patrick Liu, head of digital entertainment for the online company, told attendees at the Shanghai International Film Festival that their mission is to "redefine home entertainment," a Reuters article reported.

The service will be available via either Alibaba set-top boxes or Alibaba OS-enabled smart TVs manufactured by Haier, Hisense and TCL. Subscribers will get a range of original content produced by the company, as well as licensed content, some of which will come from overseas, Bloomberg reported.

The focus on TBO is interesting since Alibaba already owns a good chunk of Youku Tudou, a hugely popular ad-supported streaming service in China. The move is likely a preemptive one to grab as much audience share as possible while foreign OTT companies like Netflix strategize how to effectively move into the Chinese market.

But it's also a way to take a stake against its chief competitor, Tencent Holdings, and build a strong presence in the SVOD segment, a niche that hasn't been a big factor in China's OTT market. Chinese audiences are not used to paying for content, a Wall Street Journal story noted. Getting them accustomed to doing so will likely take some work—but it may well be worth it, with the online video market in China expected to nearly triple in value from $5.9 billion (¥36.6 billion) to $14.5 billion (¥90 billion) by 2018, according to Bloomberg citing IResearch data.

Foreign competitors like Netflix will not be able to directly launch in China, due to rules about how such companies can do business within the country. But it can partner with existing Chinese companies that are licensed by the state to stream content.

At the moment, Netflix has gained a toehold in the market by licensing some of its original content, including House of Cards, to Sohu.com. HBO also has a distribution deal in the country with Tencent.

Netflix reportedly has been in talks since February with Wasu Media Holdings and BesTV New Media with the aim of partnering on an OTT service in China. The news, revealed in mid-May, sent the SVOD provider's stock soaring above $600 on the Nasdaq.  However, Alibaba's move could present a formidable roadblock to its strategy.

For more:
- Reuters has this story
- WSJ has this story
- Bloomberg has this story

Related articles:
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