China’s top two video Web sites yesterday announced plans to merge in hopes of creating the dominant competitor in a fast-growing industry that is drawing viewers from bland state television.
Youku Inc (優酷) and Tudou Holdings Ltd (土豆) said the new company, Youku Tudou Inc, will be created in a stock-for-stock transaction. They said it requires shareholder approval, but is expected to be completed by the third quarter of this year.
Youku and Tudou are former rivals and were involved in a legal battle earlier this year over accusations that they were misusing each other’s content. Both have reported losses recently due to high costs for Internet bandwidth and programming.
Youku had 21.8 percent of China’s online video market in the final quarter of last year, with Tudou in second place at 13.7 percent, according to Analysys International, a research firm in Beijing.
Total revenue for Chinese video Web sites rose 135 percent over a year earlier in the final quarter of last year to 1.7 billion yuan (US$275 million), according to Analysys International.
The number of Chinese who watch online video jumped from 284 million in 2010 to 394 million last year, according to CMM Intelligence, a media consulting firm in Beijing. It said the total might pass 445 million by the end of this year.
Youku reported a 49.6 million yuan loss for the three months ending Dec. 31, but said full-year profit was 200.3 million yuan, up 450 percent from 2010.
Tudou reported a quarterly loss of 148.9 million yuan and a full-year loss of 511.2 million.