Chinese video giants Tuduo and Youku announce merger

China's two biggest names in online streaming, Tuduo and Youku, have announced a merger today despite previously being market competitors and legal rivals.

China's largest video streaming services, Tuduo and Youku, announced today that they will be merging into a new service entitled Youku Tudou Inc.

Youku has bought out Tuduo in its entirety, and the deal is currently awaiting shareholder approval. The board of directors from both companies has already approved it. If it is cleared successfully, the merger should go ahead later this year.

In an official statement, both companies made it clear that the deal is intended to solidify their dominance over the online video market in China.

Victor Koo, founder of Youku, said: "We intend to lead the next phase of online video development in China."

He added, "Youku Tuduo Inc. will represent a differentiated leader in the online video market in China with the largest use base, most comprehensive content library, most advanced bandwidth infrastructure and strongest monetisation capability within the sector."

The two companies are the largest video streaming services in China and combined already account for more than half of the online video market there.

However, this merger might have been seen as unexpected, as the two have been involved in many legal disputes in the past.

At the beginning of last month Youku filed another lawsuit against Tuduo, seeking around $762,000 in compensation after the company had claimed it had misused copyrighted materials.

Some still speculated the two companies might join forces in a strategic move. By combining they would effectively reduce the costs of copyrighted materials and increase their dominance over the market.

"In marathons you see the fastest players running together as a group," said Tuduo's chief executive Gary Wang. "We believe we can run faster by partnering with each other."

The online video market in China is becoming an attractive prospect for many new competitors. Chinese search engine Baidu has already announced its plan to launch a Hulu like service of its own. In December. China Central Television also launched their own site with copyrighted video content.