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Video licensing keeps Youku Tudou focus on China

China's largest video site will primarily focus on its home market for growth, due to licensing issues, but the company does not rule out global markets for future growth.
Written by Liau Yun Qing, Contributor on

Chinese video site, Youku Tudou, will focus its growth strategy primarily on its home market but is open to setting up international operations in the future.

During a teleconference Wednesday, Youku Tudou CEO Victor Koo said: "At this point in time, especially throughout the integration [of Youku and Tudou], the Chinese market will still be our primary focus but going forward we may look at other countries as well."

Youku and Tudou, which were China's top two online video streaming sites, first announced plans to merge in March and the move was approved by shareholders of both companies in August.

Commenting on the company's international strategy, Koo said Youku Tudou has "a lot of" overseas Chinese audience but, due to licensing issues, some videos can only be streamed to users in China.

"Similar to Hulu, a lot of traditional media company's content, especially those from international companies, are geo-blocked. So there is still a combination of programs that are not available to overseas users," he noted.

He acknowledged the inability to stream such licensed content overseas caused some audience to turn to peer-to-peer streaming clients, which may include videos that were not geographically restricted.

Youku Tudou President Liu Dele said competition from pirated content is "diluting" traffic to the company's site in the short term. However, as the Chinese government is tightening its grips on pirated content, Liu said such players "will not be viable" in the long term.

Full integration by fourth quarter
According to Liu, Youku Tudou has been actively integrating the two companies since the announcement of the merger in March, and this is expected to be completed by the end of the year.

"We have settled on the new corporate structure and the roles of the management team. All of our backend functions and key teams will be fully integrated, including media, copyright cooperation, technology, finance, and negotiation affairs," he said.

However, Youku and Tudou's sites will continue to operate separately to tailor to different audiences, said Liu. Youku will focus on talent and talk shows, while Tudou's content will be targeted at entertainment and fashion, he said.

Liu added: "Our user-facing product team which includes the Web site, editorial team, in-house production and content marketing solution will remain independent."

He said advertisers benefit from the merger as they can purchase advertising from a single source but target two different user base. Citing data from analyst firm iResearch, Liu said Youku and Tudou's user base overlap by 14 percent daily and 18 percent weekly, which still provides a better returns on investment for advertisers compared to purchasing commercial space from multiple small companies.

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