Alibaba Pictures just announced its latest quarterly results, reporting a decent 130% increase in revenue from last year, achieving a revenue of 3.3 billion yuan. Specifically, their three core business segments namely internet-based movie promotion and distribution, content production, as well as comprehensive development that involves the development and sales of merchandise grew at 129%, 143% and 148% respectively.
Yet, despite stellar revenue growth, the company overall recorded a whopping net loss of 1.659 billion over the last 15 months. The loss was mainly due to high marketing cost required to cement Taopiaopiao’s dominance in the online ticketing space.
Compete with Tencent/Meituan-backed Maoyan
Movie ticketing has always been a highly competed area in China’s TMT space. Tencent, Alibaba and Meituan, through their Weiying, Taopiaopiao and Maoyan apps, are all in scramble for a bigger piece of the pie. There was no single player taking up a dominant position.
However, the market equilibrium took a sharp turn following the Maoyan-Weiying Merger mid-year 2017.
Last September, Tencent and Meituan made a decision to combine their movie ticketing business, creating a hegemony that, according to market research firm Bida Consulting, commands a combined over 50% market share against Taopiaopiao’s 30.94%.
In playing a catchup, Taopiaopiao has undertaken aggressive subsidizing plan to lure away its competitor’s users.Such aggressive marketing with huge costs and ticket discounts caused for Taopiaopiao’s accumulated loss as reflected in its latest quarterly results.
A strategic loss-making business
But Alibaba Pictures seems to believe the loss-making to help it reclaim the crown. Earlier this year, its Chairman and CEO Fan Luyuan laid down an output goal for Taopiaopiao to become China’s largest ticketing platform and proclaimed 2018 as the year to power ahead.
Alibaba Pictures built the foundations of its entertainment ecosystem over the past few years that led to material business progression in 2017. With online ticketing reaching up to 82% of cinema ticketing in China [WHICH YEAR], Taopiaopiao is poised to sell its services on a ‘’social platform’’ as opposed to the original ticketing platform, cited by entertainment business news reporter, Variety.
Despite the overall loss due to Taopiaopiao-related marketing costs, Alibaba Pictures’ content and merchandising and licensing segments actually made a profit of RMB 4.1 million and RMB 6 million respectively. The turn around from previous year losses signal positive results for the huge strategic investments Alibaba Pictures made.