Alibaba Group Holding Ltd Faces Tough Battle In Online Movie Ticketing Business

Hong Kong-listed Alibaba Pictures said in a regulatory filing that it had raised $260 million for its online movie ticketing platform Taobao Movie. The deal gives Taobao Movie a valuation of $2.1 billion. Taobao Movie was launched in late 2014, and became part of Alibaba Pictures last year as part of a deal with its parent company Alibaba Group.

Alibaba’s financial arm invests in Taobao Movie

Investors in the latest funding round include heavyweights including Ant Financial (operator of Alipay), web portal Sina, CDH Investments, Hehe Pictures, BONA Film, and Huace Media. Funding from leading entertainment companies has fueled speculations that Taobao Movie could enter into a strategic partnership with the likes of Hehe Pictures and BONA Film.

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However, Taobao Movie faces a tough battle in the fiercely competitive Chinese online movie ticketing market. It has to engage in a cash-burning war with established giants to gain market share in the online-to-offline services. Alibaba Pictures claims its online movie ticketing service covers more than 5,000 Chinese cinemas accounting for 95% of the country’s box office revenue.

According to the State Administration of Press, Publication, Radio, Film and Television, the mainland China box office jumped 50% YoY to 44 billion yuan in 2015. Research firm Analysis estimates that roughly 70% of movie tickets in China were sold online in 2015. Both figures show a promising trend, but there is a big question mark whether Taobao Movie can survive the onslaught from established players.

Tencent-backed players dominate the sector

According to BigData Research, Tencent-backed Meituan-Dianping has more than 50% market share. Alibaba sold its stake in Meituan-Dianping earlier this year for roughly $900 million. Other players like Baidu-backed Nuomi, Tencent-backed WePiao have been burning cash aggressively to gain market share. Research firm Analysis says Taobao Movie has less than 10% share in the online movie ticketing market.

Both Tencent and Baidu have deep pockets, and they are betting big on O2O business. Only time will tell if Taobao Movie, the fourth-largest player by market share, will be able to fight them in online movie ticketing business.