Alibaba Reportedly Invests in Video Service PPTV

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Alibaba reportedly will buy a stake in PPTV, an online video streaming service, together with Hunan Satellite TV with $400 million.

The rumor that PPTV was looking for buyers has been around for a while. It was reported that Sohu and Suning showed interest. Vincent Tao, CEO of PPTV, predicted at the beginning of this year that the online video industry would see acquisitions or investments in the second half of this year.

Softbank invested $250 million for a 35% stake in PPTV in 2012. The valuation, about $700 million, is considered high as Baidu paid $370 million for PPS video service, PPTV’s direct competitor.

PPTV and PPS are similar in a lot of ways besides that both of them adopted a peer-to-peer model. PPTV made RMB800 million from online advertising and user subscriptions in 2012, as disclosed by its CEO Vincent Tao. PPS made about RMB500-600 million in the same year. PPTV covers 7.4 million mobile users as of June 2013 while PPS covers 6.08 million, according to iResearch.

Given the high valuation in the previous round, it is speculated that Alibaba would participate in this deal is to help Softbank to exit as the latter was its early investor and long-time backer. An addition of online video service may also help push up its IPO valuation.

Alibaba announced its Internet TV strategy last month, having launched a set-top box and Smart TV solution. Currently it partners WASU, an authorized Internet TV content provider, for online videos. PPTV also launched a set-top box earlier than Alibaba

Hunan Satellite TV is one of the most powerful entertainment program providers in China, but it has had no online video platform so far. Some premium programs produced by it are either sold at high prices or cannot be live streamed on any Chinese online video platform. In 2010 the TV station and Taobao established a joint venture on shopping programs and an e-commerce site HiTao.