Youku Tudou sees cost cuts after merger

Youku Tudou, China's biggest online video company, forecasts that next year's earnings will be boosted by lower costs following the acquisition of a competitor.

Industry consolidation has meant the company's two largest cost components, content and bandwidth, have both dipped this year, Victor Koo, Youku's chief executive, said yesterday.

The company was formed by the completion last month of Youku's acquisition of Tudou Holdings, to extend its lead over websites run by Baidu and Tencent Holdings.

The combination of the two biggest online video companies was aimed at reducing content licensing and network costs, and should produce savings of as much as US$60 million annually, Youku said in March.

"Last year because of some competitive issues you saw inflation of content costs," Koo said at the company's headquarters in Beijing. "We see a lot of rationalisation happening this year and that will improve the financial situation on the [profit and loss] standpoint next year."

Youku's second-quarter revenue rose 96 per cent from a year earlier to 387.4 million yuan (HK$473.7 million), the company reported on August 6, before completion of the Tudou acquisition. That was the slowest growth rate since Youku's initial public offering in 2010, according to data. The net loss widened to 62.8 million yuan from 28.1 million yuan.

Youku's United States depositary receipts have dropped 1.35 per cent since the companies completed the merger on August 23.