Chinese Online Merger

China’s largest online video company Youku.com has agreed to acquire second-ranked Tudou Holdings in an all-stock deal valued at more than $1 billion. The deal between the companies, which have been engaged in legal battles focused on alleged copyright infringement, will create a new online content giant in the world’s largest Internet market with more than 450 million Web users. The consolidation comes at a time when online video remains a fragmented space in China. However, the creation of this mega-giant should mean that more American and international films and television series should be making their way to the Chinese market in the next few years. China recently expanded its quota of international (meaning American) films that can come into the theatrical marketplace but it is online that American distributors and studios see the greatest potential, particularly for their vast libraries. China already has at least a dozen online video companies operating, but some predict that more consolidation is coming, in effect creating the “Chinese YouTube”. The implication for rights holders is enormous as the potentially lucrative Chinese market finally opens itself up to foreign product.

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