Alibaba, Lions Gate to Start China Video Streaming Service

Jul 15, 2014 10:59 am ET

(Updates shares in fifth paragraph.)

July 15 (Bloomberg) -- Alibaba Group Holding Ltd. teamed with Lions Gate Entertainment Corp. to stream Hollywood movies and television shows as China’s biggest e-commerce operator expands its video content.

Lionsgate Entertainment World will be delivered through a new Alibaba set-top box in China and include titles from “The Hunger Games” franchise and the TV series “Mad Men.” Neither company is investing in the other, said two people with knowledge of the situation, who asked not to be named because the terms are private.

Alibaba, which may be headed toward the largest U.S. initial public offering, is adding content as consumer living rooms turn into a new battleground for technology companies. In April, the Hangzhou, China-based company led a $1.22 billion investment in online video site Youku Tudou Inc. after agreeing in March to pay HK$6.24 billion ($805 million) for a 60 percent stake in ChinaVision Media Group Ltd., according to data compiled by Bloomberg.

“It’s another way for us to get content into the China market with a great partner,” Jim Packer, Lions Gate president of worldwide television and digital distribution, said in a phone interview. “We’re always exploring opportunities in China, it’s a growing content market, it’s a content market you have to be in.”

Lions Gate rose 1.4 percent to $29.12 at 10:53 a.m. in New York. The stock had declined 9.3 percent this year as of yesterday.

Packer declined to say whether any investment was involved, as did Ashley Zandy, a spokeswoman for Alibaba.

Expanding Ecosystem

The service will also enable subscribers to see behind-the- scenes footage and receive screening invitations. Packer declined to disclose the details of the partnership structure and the price for subscription. The service starts next month.

Santa Monica, California-based Lions Gate said TV shows including “Nashville” and “Rosemary’s Baby” will make their Chinese debuts on the new service, which will also add movie titles including the “Divergent” and “Twilight” franchises.

Lions Gate currently distributes content online in China with partners including Youku Tudou and Sohu.com Inc., said Packer.

“We are committed to expanding our ecosystem where our users can meet, work and live,” Patrick Liu, president of Alibaba Group’s digital entertainment business unit, said in the e-mailed statement.

Alibaba IPO

Alibaba filed for an IPO in May. The company has a value of $168 billion, according to analysts’ average estimate. While the valuation may change with the updated financials, it indicates a price of 45 times the latest year’s earnings, data compiled by Bloomberg show.

Alibaba released its first set-top box in collaboration with Wasu Media Holding Co. in September. On October, it announced it would release another box under the Tmall brand, the name of one of Alibaba’s biggest e-commerce platforms.

China’s set-top box industry is facing increased government scrutiny.

Regulators banned cable networks from pre-installing unapproved operating systems on set-top boxes, according to a July notice. The pre-installation of unapproved video applications in TV set-top boxes was banned in Zhejiang and Shanghai, Sina.com reported in June.

Alibaba said it would increase its investment in content and adjust based on regulators’ requirements.