Alibaba Pictures Makes A Big Investment In Cinemas

Alibaba Pictures, the entertainment arm of the Chinese e-commerce giant, will be investing 1 billion yuan ($154 million) for an 80% stake in a Hangzhou cinema company as it attempts to attract more attention in China’s entertainment sector. However, it has one serious rival in the sector which is growing very fast: Dalian Wanda Group.

Alibaba Pictures expanding its reach

Alibaba said in a filing earlier this week that it will acquire around 61% of Hangzhou Xingji from shareholder Hangzhou Kunwei for 39 million yuan. The e-commerce giant’s entertainment arm will invest 61 million yuan in Hangzhou Xingji as well, which means, overall, 80% equity interest once the deal is complete, reports the SCMP.

Alibaba Pictures is looking to expand its reach through investments in movie production and cinemas to satisfy the increasing demand of the Chinese audience for movies and entertainment. The company wants to create an integrated, online-to-offline (O2O) platform for the entertainment industry by joining the traditionally offline entertainment and cinema circuit with its e-commerce capabilities. This, in turn, might entice customers to buy movie tickets on their cellphones before going to the theater, the report notes.

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Hangzhou Xingji operates and owns the Hangzhou Star Cinema, which owns 11 theaters in Hangzhou. Last year, the theater company’s profits increased 416% to more than 563,000 yuan after taxes. This latest investment comes after Alibaba Pictures raised $260 million in May for its online movie ticketing platform.

A few months ago, Alibaba Pictures invested 1 billion yuan in convertible bonds issued by Dadi Cinema Construction, China’s second-largest cinema investment and management company. This investment helped the company extend its industry services and Internet capabilities to Dadi, which has around 300 cinemas across the country, the report adds.

Dalian Wanda: a serious threat

Alibaba Pictures is not the only one looking to extend its services. According to Reuters, its rival property conglomerate Dalian Wanda is expected to close two billion-dollar film-related deals this year in the U.S.

The Wanda Cinema Line, which is controlled by Dalian Wanda Group, struck a deal earlier this month with IMAX to construct 150 theaters in China over the next six years. According to CaixinOnline, this was also the biggest deal in the history of IMAX. Dalian Wanda also owns AMC Entertainment Holdings, the second-largest U.S. theater operator.

At 10:00 a.m. Eastern today, Alibaba shares were down 0.35% at $95.46. Year to date, the stock is up almost 17%, while in the last year, it is up almost 45%.

Photo by sam_churchill