Alibaba eyed as buyer of stake in Paramount Pictures, the studio behind Jack Ma’s favourite movies

Viacom shareholder urges company to sell stake to Chinese e-commerce giant

PUBLISHED : Monday, 07 December, 2015, 6:43pm
UPDATED : Monday, 07 December, 2015, 6:43pm

After Jack Ma Yun established Alibaba Pictures in Hong Kong last year, some people joked that the charismatic Chinese internet entrepreneur could one day surprise everyone by winning an Academy Award for Best Picture.

That “Oscar” scenario may not seem so far-fetched any more after news last Friday that e-commerce giant Alibaba Group was being eyed as a prospective buyer of a stake in Viacom’s Paramount Pictures, the studio behind The Godfather and Forrest Gump – Ma’s favourite movies.

Analysts said the tantalising prospect of officially becoming a part of the Hollywood establishment would help accelerate Alibaba’s plans to create an extensive online-to-offline entertainment empire.

“Jack Ma has a great understanding of the Chinese movie market,” Gamco Investors founder and chief executive Mario Gabelli said in a Financial Times report.

Gabelli, whose Gamco group holds the second-largest voting shares in Viacom behind media mogul Sumner Redstone, urged the US company to sell a stake in Paramount to Alibaba as a way to generate fresh funds and drive efforts to make more movies in mainland China.

“If Alibaba is going to be serious about getting into the entertainment industry, Viacom should sell Jack Ma a piece of Paramount,” he said.

The movie industry will provide Alibaba with more data to know what consumers are viewing, what devices they’re using and how much time they spend online
Jin Di, Forrester Research

It is an offer that Alibaba executive chairman Ma could well afford and could not possibly refuse, more than a year since the company he co-founded was listed in New York and raised US$25 billion in the world’s biggest initial public offering.

In November last year, Ma and his trusted lieutenants were widely reported to have had a series of meetings with Hollywood’s major studios and largest talent agencies to see where Alibaba could bet its money.

The initial high-profile investment of Alibaba Pictures, the Hong Kong-listed entertainment business of Hangzhou-based parent Alibaba, was in action film Mission Impossible – Rogue Nation, the latest instalment of the popular spy series starring actor Tom Cruise.

Forrester Research analyst Jin Di said acquiring a stake in Paramount would benefit Alibaba’s digital entertainment ecosystem by helping the company “capture a wider audience, obtain more consumer data to analyse and incorporate e-commerce into the global movie industry”.

“The movie industry will provide Alibaba with more data to know what consumers are viewing, what devices they’re using and how much time they spend online,” Jin said. “Leveraging buyer and seller data from this ecosystem can create a data analytics product that gives a complete view of a customer at any given phase of their purchasing journey.”

Alibaba last month agreed to pay US$3.67 billion to buy the shares that it does not own in Youku Tudou, mainland China’s top online video services provider that boasts 500 million monthly unique visitors.

“Integrating e-commerce and media consumption data will help Alibaba to understand the user better, enabling it to provide a more targeted marketing service,” Alicia Yap, the head of China internet research at Barclays, said.

The prospects are small for China internet industry peers Tencent and Baidu to follow Alibaba’s aggressive move into Hollywood.

“Tencent is not performing that well in the business-to-business industry, compared with Alibaba’s success in building a complete digital entertainment ecosystem. Therefore, it might be reluctant to enter this space,” Jin said.

On Baidu, Jin pointed out that the Chinese online search titan was already “late to the game”, with no strong digital entertainment ecosystem partnership like Alibaba.

The e-commerce giant is also not expected to encounter much scrutiny from the Committee on Foreign Investments in the US (CFIUS) if a deal with Viacom on a Paramount stake does push through, according to a source.

CFIUS is the inter-agency committee tasked to assess national security implications of mergers, acquisitions and takeovers that could result in foreign control of any US business.

“As a precedent, Dalian Wanda received all the necessary US government approvals during its US$2.6 billion acquisition of cinema chain operator AMC Entertainment in 2012,” the source said.