Alibaba Pictures, the Alibaba-backed entertainment firm, has warned investors that the unit foresees greater losses than expected, and their ticketing unit is to blame.
Tao Piao Piao, which until recently was called Taobao Dianying, has overshot its marketing budget amid unexpectedly sluggish box office sales in China.
According to a filing made to the Hong Kong stock exchange on Friday, the firm now expects net losses in the six months ending in June to be up to 450 million yuan (around $60 million USD).
“Such expenses were mainly incurred from attracting movie-goers to [use] Tao Piao Piao’s online ticketing platform,” said the filing. The ticketing subsidiary recently raised a 1.7 billion yuan A series, bring its valuation to over $2 billion USD.
Even without a stagnating box office, Tao Piao Piao’s marketing push would undoubtedly be very expensive in line with other heavily subsidized on-demand services in China. The subsidiary also underwent a costly restructuring and rebranding following their latest funding round.
Unfortunately for the Alibaba-backed firm, China’s appetite for blockbusters took a sharp dive toward the middle of the year after starting off with a bang.
Chinese ticket sales saw a unexpected 49 percent boom in 2015, which continued into the first quarter of 2016 before contracting heavily to leave second quarter figures almost 21 percent lower than the same period last year.
Losses aside, Tao Piao Piao still makes up a crucial link in Alibaba’s rapidly expanding entertainment empire. The platform drives consumers to Ali’s other offerings, primarily Taobao, through movie merchandise, as well as employing Alibaba’s own payment system, Alipay.
The service also forms a crucial support for any physical cinema presence Alibaba Pictures has in the future. The company recently purchased a 4.8 percent stake in nationwide cinema chain Guangdong Dadi Cinema Construction, which owns 313 cinemas over 150 cities.