The film unit of Jack Ma’s online giant Alibaba has issued a warning that its half year losses will be higher than expected. Alibaba Pictures Group, which had been expanding aggressively in recent months, blamed the losses on increased marketing costs at its online film ticket portal Tao Piao Piao. The losses are estimated to be between $52-58 million. The news coincides with an unexpected downturn in China’s box office.
After commentators had forecast China would be the world’s largest single box office market by the end of last year, overtaking North America, those expectations are being dialled down on the back of a disappointing second quarter this year, which saw the Chinese market contract by 5%, for the first year-over-year quarterly decline in more than five years. One of the reasons for that downturn is believed to be online ticket sellers- the way the majority of tickets in China are bought- scaling back the kind of discounts and special offers that helped turbo charge China’s box office in recent years. Competition between rival portals is also fierce.
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Alibaba Pictures acquired Tao Piao Piao, previously known as Taobao Movies, from its corporate parent this year and raised $254 million of capital for the portal, valued by the company at over $2 billion. Alibaba Pictures itself is valued at $5.79 billion.
In June, Alibaba Pictures unveiled the development and production pipeline it hopes will establish it as a major player in the Chinese film biz and beyond. Announced at the Born to be Different strategic conference in Shanghai, Alibaba Pictures’ production slate included 17 features. Among the titles planned are Storming 30 Years, Zhengtu,No Other Love, and two TV programs, Ge Jin Tao Hua and The legend of Zu 2. Other projects include Sword of Legends 2, Three Lives Three Worlds Ten Miles of Peach Blossom, Asura, as well as Qi Huan Zhi Lv and Qing He Male College.
Alibaba Pictures was borne out of the acquisition of a majority 60% stake in ChinaVision by online retail giant Jack Ma’s Alibaba Group in March 2014 for $800 million as the e-commerce entrepreneur sought to add as much value to his group as possible ahead of the ultimately blockbusting IPO last September. The newly monikered company has gradually been working towards expanding its operations since its launch. In January last year, it announced it had brought on-board celebrated Hong Kong filmmaker Wong Kar Wai (In The Mood For Love) to produce its first film Bai Du Ren, written and directed by Zhang Jiajia and starring Wong Kar Wai regular Tony Leung (2046).
In March last year, Ma announced Alibaba had also acquired an 8.8% stake in Enlight, one of China’s leading film and TV production companies, valued at $380 million. Shares in Alibaba Pictures soared after its parent company — at one point valued at more than Walmart — announced it was considering an asset injection in the film unit and that it was planning to fold its online movie-ticketing business (Taobao Movies) as well as its movie production crowdfunding business into Alibaba Pictures.
In March this year Alibaba Pictures revealed net annual profits of $71.7 million, up from a loss of $64.2 million the previous year, although latter figure includes the acquisition price of ChinaVision.The loss warning was announced after Friday trading closed on the Hong Kong Stock Exchange.
Alibaba Pictures has also been ramping up its investments in Hollywood content. Its first English language investment was Paramount’s Tom Cruise secret agent picMission: Impossible – Rogue Nation. Alibaba Pictures is reteaming with Paramount via investments in two of the studio’s summer tentpole films — Teenage Mutant Ninja Turtles: Out Of The Shadows and Star Trek Beyond. The production arm of Jack Ma’s e-commerce giant has also announced plans for a partnership on an unspecified film from Italian director Giuseppe Tornatore (Cinema Paradiso).
Those deals came shortly after Alibaba Pictures said it would team with Skydance(which also had a hand in M:I5 and is in Star Trek Beyond) on The Flying Tigers, a film about the volunteer group of U.S. Army Air Corps, Navy and Marines that defended China against Japanese forces before America entered World War II. Further setting its sights beyond China, Alibaba also previously set a deal for Korean action title, Real.
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