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Chinese smart hardware and internet service provider Xiaomi revealed further details for its ambitious US$1 billion digital content plan released last week.

The burgeoning startup announced a strategic partnership with Youku Todou, one of China’s largest internet companies. It plans to acquire the latter’s circulating shares with eight-digit US dollar investment for the development of a multi-screen media and entertainment ecosystem.

Xiaomi’s founder, chairman and CEO Lei Jun named this partnership as the inaugural project for Chen Tong, VP of content investment and content operation. Chen joined Xiaomi last week having previously served as Sina’s editor-in-chief and Executive Vice President, and is spearheading Xiaomi’s efforts in video content with Wang Chuan, a Xiaomi co-founder and VP.

Xiaomi is a proponent of the business model of selling low price hardware and commercializing the back-end services, which means software and content are essential components in generating revenue. Online video is obviously a crucial sector in this model.

Due to the lack of such resources, Xiaomi has been troubled by problems of streaming video from authorized licensees and copyright infringement lawsuits in the past. But following the creation of the partnership, content from Youku is expected to be available on Xiaomi’s smart set-top boxes, TVs, phones, and tablets.

Sina Tech reported that an industry insider said that Xiaomi is going to take a further step in tapping the digital content market, claiming that Xiaomi is planning to announce a US$300 million investment in iQiyi, another leading online video site in China. He added that an executive from Xiaomi is expected to join the board of iQiyi. The report noted that Xiaomi did not comment on the news.