NetEase, one of the largest portal site slash game vendor in China is reported to invest more than RMB 200 million (US$ 31 million) into its online video business with special focus on copyrighted contents.
According to people familiar with the matter, NetEase has planned something fiercely regarding online video strategy, however its late move is due to the company’s concerns over the market maturity .
At the current state, NetEase online video offering is equipped with contents from TV station. It’s patently lacks behind in shopping quality TV serials and movies as compared to its counterparts such as Qiyi, Sohu Video and Xunlei.
For example, according to a Goldman Sachs report, costs related to copyrighted content purchasing of Youku would rise up to RMB 2.7 billion(US$ 41million) in FY11, while Qiyi, the Chinese Hulu, was rumored to spend up to RMB 1 billion on quality copyrighted content last year.
Just take a wild guess, people believe NetEase’s latest move in online video signals the company is getting prepared for the spin-off of its portal business which will be going public.
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The NetEase spent so much money for online video business but the money that will return will be more than they invested.