A Shenzhen-based internet video company partially owned by Google plans on following in the footsteps of Youku and Sohu by listing in the US, even amid fears that China's online video market won't live up to its promise.
Shenzhen Xunlei Network Technology, a Chinese video and music file-sharing company with a tiny market share, is planning to raise about $200m via a US IPO sometime this year, Bloomberg has reported.
The company has already hired JPMorgan Chase and Deustche Bank to underwrite the IPO.
Given the strong share performances of Youku and Sohu, it's obvious why Xunlei would want to list in the US. But there are also growing concerns about whether Chinese online video companies can consistently generate profits, given that they don't own the content they stream.
"China's online video companies need to buy content, which is costly," said Paul Wuh, a tech analyst at Samsung Securities in Hong Kong. "The only way they can make money is through advertising, but the revenues generated from advertising must offset the cost of buying content."
Last year, China's largest online video companies - Youku, Tudou and Sohu - moved aggressively at securing the rights to stream overseas films and TV shows by partnering with foreign giants such as Sony and Warner Bros.
Youku, China's No. 1 online video company, recently reported a jump in fourth-quarter gross revenues, thanks mostly to advertising. But the company, which raised more than $203m via a US listing last December, has yet to record a profit.
Xunlei -- which means "Thunder" -- offers a similar online video streaming platform, as well as a Bit Torrent-like file sharing program. But plans to list in the US have forced the company to change its business model by focusing less on file-sharing -- which is illegal in the US -- and more on online video.
But the industry is becoming increasingly competitive. And Xunlei took up only 3.2 per cent of China's online video market as of September last year, according to Analysys International a the Beijing-based consultancy. The company is way behind Youku, Tudou, PPStream and Sohu.
Source: Analysys International"I can name a dozen Chinese video companies off the top of my head and Xunlei isn't one of the most popular ones," Wuh told FT Tilt. "Having said that, this industry is a fantastic development, but the downside is that it's costly to run."
Of course, there's immense potential in China's online market of 450m users -- Xunlei currently has 190m -- and listing in the US could further boost its profile at home on the mainland, a strategy that has worked in Youku's favour. Tudou, China's No. 2 online video giant, is looking to list on the Nasdaq this year as well.
Further, Xunlei is backed by Google, which paid $5m for a 4 per cent stake in the company back in 2007. But with only a fraction of China's online video market, grabbing a larger market share doesn't look easy.
See also:
Full FT Tilt coverage of China's Internet industry - FT Tilt
Seems the problems plaguing US online video sites like Hulu, which have to pay for content in an increasingly competitive environment, are similarly impacting the Chinese market. Chinese video sites have been much more successful tapping the public markets with several IPOs in the US and a few more in the pipeline. It will be interesting to watch the market performance of the Chinese sites as the Chinese streaming media audience matures and monetizes its content with Google-like efficiency, which bought the money pit YouTube and turned it into a profitable, scalable entertainment platform to rival network television.
No comments:
Post a Comment