China’s tech giants are racing to build a great wall of content. Smartphone maker Xiaomi and e-commerce group Alibaba have channeled billions of dollars into programming for internet TV. It could be more than a fad. If viewers pay up, content can bring in revenue streams more stable and lucrative than ad dollars and one-off hardware sales. For investors, that’s something worth tuning in to.
Xiaomi’s $300 million investment in online video site iQiyi, announced on Nov. 18, is the latest installment of a $1 billion planned investment in internet TV content. Just a week earlier, the company sealed a separate alliance with another popular video site, Youku Tudou. Alibaba is similarly stretching its business model. The company and its chief executive have splashed out some $3 billion dollars this year in entertainment alone.
Watching online shows on a television is a new idea for China’s 618 million internet users, many of whom use smartphones. Sales of internet-connected TVs and set-top boxes were just 24 million in 2013, according to iResearch. In contrast, Youku Tudou has over 500 million people streaming shows for free at least once a month. While Goldman Sachs reckons the audience for internet TV could hit 77 million by 2015, it has so far been hard to pin down a decent business model.
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