MEDIA: Nothing New in Youku’s New Paramount Tie-Up

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Youku Tudou in new licensing deal

It’s a quiet day on China’s corporate news front, as many companies stay silent and hope that the latest sell-off on the nation’s stock exchanges calms as the week progresses. So in the absence of major news, I thought I’d look at the latest Hollywood tie-up involving Youku Tudou (NYSE: YOKU), and do some reading between the lines about what it means for the struggling online video company.

The thing that most caught my attention about this latest licensing deal between Youku Tudou and Paramount Pictures was how passe it seemed. Youku Tudou and its rivals were frequently making this kind of announcement a couple of years ago, when they were trying to secure premium content that web surfers would pay to watch on their sites. But nowadays such deals don’t seem like big news anymore, and instead companies are focused on creating their own exclusive content.

The other thing that caught my attention was the continued use of the Youku Tudou name in the announcement. Chinese media cited company officials last month saying Youku Tudou was seeking to reposition itself by focusing more on original content creation, and that it had selected a new Chinese name of Heyi as part of that drive. (previous post)

I thought we’d see an official English announcement a short time later, including a new English name, as the company tried to revive flagging investor interest in its shares. But we haven’t seen any such announcement, and the latest announcement instead looks like something that could have been issued just as easily a year or two ago as today.

If Youku Tudou was hoping the announcement would give its embattled shares a lift, then perhaps it had the intended effect. The company’s stock rose 2 percent in the latest New York trading session, though we should also note that most US-traded Chinese Internet companies were up for the day. And from the longer perspective, Youku Tudou shares have still lost nearly half their value from a peak in early June, which is when China’s domestic stock markets were also at at peak.

Growing Video Library

Its latest tie-up will bring more than 100 new movies and other video from Paramount’s library to Youku Tudou. (company announcement) Youku Tudou said the deal will bring the total number of products in its video library to more than 4,000. There’s no word of exclusivity in the agreement, which means Paramount is free to license the content to other companies in China.

Youku Tudou was actually involved in an embarrassing gaffe back in June involving the exclusivity issue, when it said a similar licensing deal with Disney’s Marvel unit was exclusive. It had to issue a clarifying announcement several days later saying that particular deal wasn’t exclusive, though I doubt that anyone really cared that much.

The bottom line is that Youku Tudou is still losing lots of money, and CEO Victor Koo is trying desperately to find a receptive audience among investors for his company’s shares. The company reported a $55 million net loss in its latest quarterly results, more than double the loss a year earlier, though it still had a relatively large $1.3 billion in cash at that time.

This latest announcement of the Paramount tie-up isn’t really cause for much excitement in my view, since it’s not exclusive and the company has made many similar announcements over the past 2 years. Instead, one has to wonder why Youku Tudou continues to rely on this type of older-style announcement, and isn’t instead drawing investor attention to its new identity and growing focus on own-content development.

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