Youku, Tudou ink video-swap agreement

09:27, February 04, 2010      

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Two major video-sharing websites reached an unusual deal yesterday, agreeing to share a portion of their video libraries with each other, as part of an effort to fend off new competition from new market players.

Former rivals Youku and Tudou, China's two largest Youtube-like sites, said they have agreed to share soap-opera videos that previously streamed exclusively on their separate websites.

The two firms, which account for about 80 percent of China's online-video market, also announced they will unite in the purchase of new, copyrighted video content.

"From a traditional point of view we are enemies, or at least competitors," said Victor Koo, chief executive of Youku. "But we hope we can formulate a business model from which both of us can benefit."

The agreement comes at a time when newcomers are reshaping the online video landscape. Over the last few months, Chinese Internet giants Baidu, Alibaba and Sohu as well as State-run-media groups have announced plans to enter the online video market, putting new pressures on the dominant market leaders.

Gary Wang, founder and CEO of Tudou, describes the partnership as a common strategy designed for the long haul. "In marathons you see the fastest players running together as a group," he said. "We believe we can run faster by partnering with each other."

Due to copyright issues, Tudou and Youku are expected to fork out huge amounts of money to purchase video content from copyright owners. According to an industry source, Chinese online video prices have jumped several times over the last year as market competition intensifies. That has made content expenditures the greatest cost for many online-video sites.

Youku and Tudou indicated yesterday that the partnership would effectively reduce content costs.

Last month, Chinese search engine Baidu announced plans to enter the online video market by establishing a business unit that works on a business model similar to Hulu's, which is an advertising-supported, online video website in the US and backed by NBC Universal, News Corp and The Walt Disney Company.

Last December, China Central Television launched its own online video website after reportedly receiving 200 million yuan in government funding.

"Hulu's business model has served as a good example for many Chinese companies that believe online video is now a lucrative and mature market," said Edward Yang, president of domestic IT research firm Analysys International.

Yang said there definitely would be more new market entries in the future, a trend that may marginalize websites like Youku and Tudou.

At the end of last year there were 240 million online video site users in China, accounting for 62.6 percent of the nation's 384 million Internet users, according to figures from the China Internet Network Information Center.

Source: China Daily
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