Alibaba Pictures to take 1 billion yuan in convertible bonds
Subsidiary of e-commerce giant seeks to expand in Chinese cinema market
Alibaba Pictures, the entertainment subsidiary of e-commerce giant Alibaba Group, is making its first foray into China’s booming cinema industry by subscribing to a 1 billion yuan (HK$1.19 billion) tranche of convertible bonds issued by Guangdong Dadi Cinema Construction.
“Cinemas will play an integral part in Alibaba Pictures’ operations as the company aims to build an integrated entertainment platform for the film industry,” Alibaba Pictures chief executive Zhang Qiang said in a statement.
In a filing with the Hong Kong stock exchange late on Monday night, Alibaba Pictures said the investment gave it the right to turn the convertible bonds into a 4.76 per cent equity holding in Dadi Cinema – the mainland’s second-largest cinema investment and management company, behind property-based conglomerate Dalian Wanda.
The cooperation with Dadi Cinema will let the company fully utilise its strengths … to develop a more diversified business model
Alibaba Pictures, through subsidiary Zhong Lian Sheng Shi, also forged side deals involving cooperation in film promotion and marketing, as well as for the development of e-commerce and other movie-related businesses.
“We believe the cooperation with Dadi Cinema will let the company fully utilise its strengths … to develop a more diversified business model and facilitate the development of the [mainland] film industry,” Zhang said.
At the end of last month, Dadi Cinema owned 313 cinemas – with 1,662 screens – in 28 provinces and 150 cities across the mainland.
The company, a subsidiary of Hong Kong-listed investment holding firm Nan Hai, recorded total cinema attendance of 71.58 million people last year and its box office takings rose 47 per cent year on year to 2.2 billion yuan.
Data from the State Administration of Press, Publication, Radio, Film and Television showed that mainland China’s total box office reached a record US$6.78 billion last year, up 48.7 per cent from 2014.
Dadi Cinema general manager Yu Xin said the cooperation with Alibaba Pictures would “enhance the synergies of both parties in aspects such as film distribution, movie marketing, joint membership management and the establishment of big data”.
Alibaba Pictures was established in August 2014 after Hangzhou-based parent Alibaba paid US$804 million in March that year to take over a 60 per cent controlling interest in China Vision Media Group. Alibaba also owns the South China Morning Post.
The entertainment subsidiary reported a net profit of 466 million yuan for last year, putting it in the black after a net loss of 417 million yuan in 2014.
Revenue last year jumped 108 per cent to 263.72 million yuan, up from the 2014 total of 126.63 million yuan.
Alibaba Pictures’ first investment in a Hollywood blockbuster, the Tom Cruise-starrer Mission: Impossible – Rogue Nation from Paramount Pictures, proved a huge success for its new international business unit, which was set up in Los Angeles in the second quarter of last year.
“We expect cross-border collaboration opportunities to accelerate in the coming years,” Alibaba Pictures chairman Shao Xiaofeng said in March.
The company completed its acquisition of cinema ticketing system supplier Yueke in June last year. Yueke supplies to more than 1,800 cinemas across the mainland and also provides connecting software for more than 30 mainstream online movie-ticketing portals.
“As our national box office ticket sales continue to rise, we believe Yueke is in an attractive position to capture the market’s potential economics,” Shao said.
In November, Alibaba Pictures also acquired parent Alibaba’s online ticketing business and Yulebao crowdfunding platform for entertainment-related projects.
