By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Look around the subway in Beijing or Shanghai and maybe nine of 10 passengers are watching videos on their mobile devices. Chances are most of them are watching content delivered to them by Youku Tudou. The country’s leading internet television operator streams 400 million videos a day. In that sense, Youku is Netflix and YouTube - plus Comcast and Liberty Media - stuffed into one dumpling. It is also the nexus for Hollywood’s high hopes in the Middle Kingdom.
You wouldn’t know it from Youku’s financial reports. The company founded by Victor Koo, and run day-to-day by a former student of central planning, Dele Liu, is listed in New York, where it commands a relatively modest $4 billion market cap compared to Netflix’s $26 billion. In the first quarter, it lost $36 million on revenue of $113 million. Still, the company is making progress, enough that China’s sultan of e-commerce, Alibaba, bought 16.5 percent of the group for $1 billion in April.
Youku’s long-term fortunes depend on two things: securing and defending copyright for hit shows, and getting Chinese consumers to pay for the privilege of watching them, something they’ve long resisted. China’s government even seems to be getting on board in the battle to protect the makers of intellectual content from robbery. For this reason alone, Tinseltown should hope the scrappy Chinese company can pull it off.
China is still the high seas of global internet piracy. But there are flickers of hope on the horizon. Last week saw a significant advancement in government promises to clamp down on copyright theft when Shenzhen’s Market Supervision and Administration Bureau issued a fine of 260 million yuan ($42 million) to QVOD, a website accused of distributing videos without permission.