Alibaba Group Holding Ltd (NYSE:BABA) has been heating up Wall Street since before its initial public offering, but most of the commentary focuses on its ecommerce assets. However, CEO Jack Ma has said they have designs on investing in entertainment, and analysts at Deutsche Bank have provided analysis on Alibaba’s entertainment investments thus far.
Alibaba in content production
The Talas Turkey Value Fund returned 9.5% net for the first quarter on a concentrated portfolio in which 93% of its capital is invested in 14 holdings. The MSCI Turkey Index returned 13.1% for the first quarter, while the MSCI All-Country ex-USA was down 5.4%. Background of the Talas Turkey Value Fund Since its inception Read More
Ma said recently when he spoke at the WSJ.D Live conference that Alibaba will become the world’s largest entertainment company. The Chinese online retailer’s current investments in the entertainment industry can be lumped into four major categories: content production, distribution, sports and finance.
In their report dated Nov. 7, 2014, analysts Alan Hellawell III, Vivian Hao and Ross Sandler said they expect ChinaVision to become one of Alibaba’s big content production platforms going forward. As of early this year, Alibaba had about a 60% stake in the Chinese content production company, which was later renamed Alibaba Pictures.
Alibaba in content distribution
Alibaba Group also has its hands in content distribution, as the Chinese ecommerce giant announced that it had struck an agreement with Wasu Group for a strategic cooperation. Wasu Group’s biggest business is digital media broadcasting and distribution. The company said its cable TV network covers over 20 million people.
In May, Alibaba also bought a 16.5% stake in Chinese online video platform Youku. Together with the deal with Wasu Group, the Deutsche Bank team believes Alibaba will be able to build a strong entertainment ecosystem by leveraging its capability to distribute content.
Alibaba in entertainment-related finance
Alibaba also launched its entertainment-related crowd-funding product YuLeBao. It enables any consumer in China to invest small amounts of no more than RMB 1,000 per user into upcoming movies. Subscribers also have opportunities to interact with the actors and actresses who will star in the film.
In just the first four days, the first four movies met their funding targets through the crowd-funding site. The Deutsche Bank team thinks this product innovation may be an important source of financing for Alibaba’s entertainment production capabilities.
Alibaba eyes sports
Alibaba is also interested in getting into the sports industry. In June, the Chinese online retailer announced that it planned to buy a 50% stake in Guangzhou Evergrande Football Club for RMB 1.2 billion. The football club has been the Chinese Football Association Super League’s champion for the last four years. It is also the first champion of the Asian Football Confederation’s Champion League Cup from China.
The investment marks Alibaba’s entry into the sports industry, and the Deutsche Bank team thinks the company will make further investments in this area as well.
The analysts have a Buy rating and $112 per share price target on Alibaba Group Holding Ltd.