Youku's Founder To Head Alibaba's $15 Billion Culture & Entertainment Investment Fund

(Chinese Version)

Editor's Note:

October, 31st, Beijing. It is revealed that Youku s founder Gu Yongqiang has already left Youku Tudou and gone back to his old business: investment.

We ve learned from Alibaba s internal letters that Alibaba was preparing to establish Alibaba Culture & Entertainment Group and raise a $1.5 billion fund to invest in culture & entertainment sector. The first batch of investors for the fund includes: Alibaba Group, Gu Yongqiang himself and Chengwei Ventures. Coincidently, Chengwei Ventures was also a big shareholder of Youku, and it was its representative Li Shimo who brought Youku and Tudou together.

According to the internal letter, Yu Yongfu, head of Alibaba s UC Business Division, was appointed as Chairman and CEO of Alibaba Culture & Entertainment Group. He will be in charge of Alibaba s business in culture and entertainment area and directly report to Alibaba s CEO Zhang Yong, while Yang Weidong, president of Youku and CEO of Alibaba Music, He Xiaopeng, president of UC Browser, will report to Mr. Yu.

As for Mr. Gu, he will become chairman of Alibaba s Culture and Entertainment Strategic Investment Committee and be in charge of the fund directly. He will no longer be Chairman and CEO of Youku Tudou and instead will assist Zhang Yong in developing Alibaba s long-term strategic investment plan in culture and entertainment area.

In addition, TMTpost exclusively finds out that Alibaba s CEO Zhang Yong and Yu Yongfu announced the news at the Beijing office of Youku. As of press time, relevant parties are still discussing about matters related to appointment.

According to public record, Alibaba s Grand Culture & Entertainment Sector was established as early as this June. After acquiring Oneness Group (formerly known as Youku Tudou), it s natural that Alibaba classifies Oneness Group into Culture & Entertainment Sector inside its ecosystem. Other components in this sector include: Alibaba Music, Alibaba Sports, UC, Alibaba Games, Alibaba Literature, Digital Entertainment Business Division, etc.

At that time, Mr. Gu was already appointed as president of Alibaba Grand Culture & Entertainment Work Group Industry Development Committee and was responsible to assist Alibaba in developing a long-term investment plan in culture & entertainment area. Since then, Oneness Group has begun to play a larger role in Alibaba s grand culture & entertainment sector.

During the Open Ecosystem Conference of Oneness Group this September, President Yang Weidong already revealed that Alibaba intergated Oneness Group s resources with other pan-entertainment business . While Youku Sports would become a common platform for Youku and Alibaba, and would be integrated to Alibaba Sports, all the culture & entertainment contents Alibaba invested in would be coordinated with Oneness Group. Besides, he revealed that Alibaba was also planning to integrate Oneness Group with Alibaba Music, Film, etc.

At the conference, Mr. Gu revealed that Alibaba was busy establishing a mechanism and dividing its business, and would upgrade the grand culture & entertainment sector in half a year or so. Now it seems that Alibaba was indeed shifting its strategy and structure in grand culture & entertainment sector.

As a matter of fact, there are already lots of rumors saying that Mr. Gu was to leave oneness Group before the conference. He also indicated that he might do so in an interview, comparing himself to a horse and saying that it might be time for him to have a rest after “running for a long while”.

Based on Mr. Gu s resume, he used to be vice president of a venture investment company called Richina Inc, and was in charge of projects related to media, entertainment and industry. Since he d already been assisting in developing investment strategy of Alibaba in grand culture & entertainment sector for a long time, his job shift might come as no surprise. Yet, we still don t know if he would be directly handling investment projects.

In the past two years, competition is racheting up among Baidu, Alibaba and Tencent (together known as BAT) as culture industry is burgeoning in China.

During the Investor Communication Conference held this June, Alibaba announced for the first time that revenue of “Mobile Media and Entertainment” sector would no longer be included in “Other Sectors” and instead be counted individually, which also suggested that after other new businesses such as e-commerce and cloud computing, Culture & Entertainment sector had already become another major source of revenue for Alibaba.

It has been very typical for Alibaba to develop its strategy in Culture & Entertainment sector through merger and acquisition. After rounds of merger and acquisition, Alibaba has already owned around 30 companies related to cultural industry, including Oneness Group, Huayi Brothers, Bona Film Group, Wasu Media, Sina Weibo, Xiami Music, Hengda Taobo Club, etc., according to incomplete statistics.

Although Alibaba has already owned so many businesses, its performance in culture & entertainment sector still wasn t excellent enough.

Video Streaming

In November, 2015, Alibaba acquired Youku Tudou s full asset with $5.6 billion. Up till now, however, no player has stood out amid the fierce competition in the Chinese video streaming market and VIP membership fee is still a major source of their revenue. After the acquisition, Youku Tudou preferred to talk about the integration of video streaming platform and e-commerce platform. In fact, such combination has already created a new source of revenue for Youku Tudou.

Music

Although Alibaba has already acquired TTPOD and Xiami Music, as well as poached popular Chinese musician and songwriter Gao Xiaosong and Song Ke to lead Alibaba s business in the sector, things didn t work out as planned. On the contrary, since TTPOD has to bear too much responsibility for Alibaba, it received lots of negative feedback in the circle. Although Alibaba dreams big in the music sector, it is suffering from huge stress at the same time.

Film

This is especially worthy of mentioning and this is the area Alibaba focuses much of its attention. Up till now, Alibaba s business line has already covered the entire industry chain, from content producing, offline promotion to online ticket-booking, offline theatre and e-commerce, etc.

This March, Alibaba acquired hong Kong-based Culture China; this August, Alibaba changed the name of its film sector into Alibaba Pcitures. Later on, Alibaba focused its attention on Taobao Film, Entertainment Bao. Besides, Alibaba acquired the full asset of TMS, one of the most popular providers of theatre ticket arrangement system, through Alibaba Film. In addition, Alibaba got involved in the privatization of Bona Film Group as well as the investment of Dadi Cinema and Up Pictures, Huayi Brothers, Enlight Media Group, New Base Meida and Bale Media, etc.

This October, Alibaba Film even eyed on the overseas film market and signed a strategic cooperation agreement with Steven Spielberg s Amblin Partners. According to the agreement, the two parties would work closely in areas including investment co-producing, by-product, promotion and distribution.

However, it seems that we still seldom see films produced by Alibaba Film. We learn that no film Alibaba is involved with, whether through investment, producing or promotion, has been released yet. Its online ticket-booking platform Tao ticket remains the major source of its revenue in this sector.

That is to say, integration of Alibaba s resources in culture and entertainment sector hasn t yielded any concrete result yet. This may actually also helps explain why Alibaba makes so many moves recently.

The following is the internal letter of Zhang Yong, CEO of Alibaba:

All staff at Alibaba,

I am glad to be able to announce this to the company: Today Alibaba has made one firm step further in the culture and entertainment industry strategy. We have officially initiated the establishment of Alibaba Culture & Entertainment Group. Besides that, we are also building a large-scale fund for the cultural and entertainment industry with a scale of over 10 billion RMB. Alibaba firmly believes in the future of the culture and entertainment industry and will continuously invest in the sector.

That said, Alibaba s ever-evolving ecosystem will nurture another brand new ecosystem, the ecosystem of the culture and entertainment sector.

Alibaba s culture and entertainment ecosystem will fuse with our e-commerce, finance, logistics and cloud ecosystem, making Alibaba s product line more comprehensive. It will enable us to provide better and more diverse experience and service for our consumers as well as clients.

More importantly, Alibaba Cultural & Entertainment Group not only carries Alibaba s development mission, but also the mission to push culture related industries to integrate with the Internet fully, including the film, video, literature, music and sports sector etc. The group sets to bring these industries to the future.

After research, Alibaba Group has made the following decisions:

1. Alibaba Culture & Entertainment Group will be founded upon the foundation of Grand Culture and Entertainment Leading Group s business, including: Youku Tudou, UC, Alibaba Pictures, AliMusic, AliSports, Aliplay, Aliwx, Alibaba Digital Entertainment.

2. Yu Yongfu will be appointed as the board chairman and CEO of Alibaba Culture & Entertainment Group and will be reporting directly to me. Yu Yongfu possesses incredible business insight, great leadership and highly efficient execution capacity. During his time at the director of Alibaba Grand Culture and Entertainment Leading Group, he successfully processed and integrated the separate businesses and made them into a bigger picture, laying a solid foundation for the establishment of Alibaba Culture & Entertainment Group.

3. Gu Yongqiang will be the president of the strategic and investment committee for the culture and entertainment industry, in charge of establishing the culture and entertainment industry fund. He will be assisting me to drive the development of the industrial ecosystem through investment.

Gu Yongqiang will no longer be the board chairman and CEO of Youku Tudou. He will exit from current post to better observe the industry, and manage the large-scale fund with his understanding of the culture and entertainment industry as well as incredible business and foreseeing mind.

Our sweats will eventually lead us to success. The door to the future has opened, let s keep up the spirit!

Xiaoyaozi
CEO of Alibaba Group
October, 31st, 2016

The following is the internal letter of Gu Yongqiang

Act Like One and Create A Brighter Future

My fellow colleagues,
I believe you ve all seen the latest move of Alibaba in grand culture and entertainment sector. Basically, I will become president of Alibaba Culture & Entertainment Strategic Investment Committee, and the committee will be in charge of strategic planning and investment of Alibaba in the sector. We plan to establish a fund of around $1.5 billion and I, Alibaba as well as Chengwei Ventures will become the first batch of investors.
At the same time, Alibaba is busy preparing to establish Alibaba Culture & Entertainment Group. Yu Yongfu will become board chairm and and CEO, while Youku Tudou will become one of the major business of the group and Yang Weidong will continue to lead and manage Youku Tudou.

I have every confidence to believe that the combination of both a fund and a business group will yield concrete result and better promote the prosperity of the industry.

It has been 11 years since we started from Youku and later merged with Tudou and renamed into Oneness Group. I am grateful for working with all of you for all this time. Although we started from rags, we ve led the industry several times and achieved our prophecies time after another. Together, we witness the combination of TV network, telecommunication network and broadband internet network, as well as the blending of multi-screens. Time after another, we ve led the trend of the mobile internet industry.

It is us who defined content producing models such as MicroVideo, Talkshow, Internet RealityShow, etc. Besides, we ve produced lots of high-quality contents by ourselves, created entirely-new user experience via VR, live broadcasting and video e-commerce, and significantly diversified the content in culture and entertainment sector in China.

After privatization, we ve created lots of popular video series, including A Smile is Beautiful, Mars Intelligence Agency, and set up new record for video traffic. On December, 21st, the 10th anniversary of Youku, we will re-appear to the public as a younger and more entertaining Youku and embrace the next decade with brand new attitude.

Today, I want to leave Youku here, with over 580 million MAU, 1 billion daily view times, and 1.3 year-long daily view time, to Yu Yongfu and Yang Weidong. I look forward to seeing that they will lead to into a brighter future.

Yu not only brings UC to success and proves to be a successful entrepreneur, but also brings Amap to a new high in the industry and keeps Alibaba s mobile business group and Alimama s business thriving.
His rich experience in mobile internet, startup and team management is very complementary to us, and will certainly help us better integrate with Alibaba s all kinds of resources and really become a member of Alibaba s big family.

Yang also used to be an entrepreneur. Since joining Youku, he s set new record times after another. He not only makes our brand look younger and more entertaining, but also created, along with his teams, several super popular contents and innovation models. In the process, his experience in team construction and management also improved significantly. I feel really lucky to be able to find two very complementary persons to take up the baton.

At present, the Chinese culture and entertainment industry is in the golden days. Internet platforms are deeply involved in the upstream of the ecosystem. With the wide adoption of big data technologies, entertainment contents have completely changed people s consumption and interaction habit. The market is very promising, and there s so much we can do next.

My dream starts on November, 1st, 2005. For the past 121 years, I feel so proud to work with you guys. You are all very professional and keen in work. Together, we all believe in our mission, that is, to share happiness and affection in a smarter way, witness our own development and growth, and help nurture our partners in the ecosystem. It gives me greatest pleasure to be able to work with people I like and do appropriate things at appropriate time.

In the future, I, together with Liu Dele, shall cooperate with you all through investment, empowerment and connection, speed up the development of the industry by standing in the forefront and bring about greater success in our main “battlefield”.

Both the culture & entertainment fund and the group aim to expand Alibaba s culture & entertainment ecosystem and connect with more partners in the sector. Let s go hands in hands, creates new glory in the culture and entertainment sector and a more “You”(which means “better”) and more “Ku” (which means “cooler”) future not only for Youku, Alibaba but also for the entire industry.

Vkoo
October, 31st, 2016

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[The article is published and edited with authorization from the author @Han Pei please note source and hyperlink when reproduce.]

Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.