SHANGHAI (Reuters) - China’s Youku expects to record a profit within three years, after which it may list in New York or Hong Kong, its chief executive said, adding that the company targets more partnerships internationally to help it attract users in the world’s largest Internet market.
Youku, which operates a video-sharing service similar to Google’s YouTube, is moving away from a user-generated content business model towards a professional syndication platform similar to Hulu in the United States, which streams licensed videos online for free, to drive growth.
The company makes the bulk of its revenue from advertising and would bank on mobile video and subscriptions to premium channels to spur profit in the future, its chief executive said on Monday.
“We believe in the long term future of mobile video, both on the value-added services side, and the advertising front, but this needs time to grow,” Victor Koo told Reuters in an interview, giving a 2-3 year timeframe.
“Most Chinese Internet companies are listed either in New York or Hong Kong. These are the two primary markets we would consider,” Koo said of his company’s plan for an eventual IPO.
Youku, which competes with Tudou in China’s highly fragmented video industry, is market leader with 12.6 percent of the market, according to data from research firm Analysys International.
Youku, backed by Chengwei Ventures, Maverick Capital and Brookside Capital, recently raised $40 million to finance the purchase of movie rights and to produce its own content.
The company, established in 2006, recorded revenue of 200 million yuan ($29.30 million) in 2009 and would continue to grow at a triple-digit rate in 2010, Koo said.
Youku, which was recently embroiled in a copyright infringement lawsuit with Sohu, is looking to shift toward more professionally produced content.
“Syndication in China is highly fragmented and that is arguably more favourable for a platform like Youku than a user-generated video environment that is still in its infancy,” Koo said. Koo was previously president of Sohu.
A syndication model would also make it more acceptable for the Chinese authorities, who are particular about media regulation and have banned Facebook, Youtube and Twitter in China.
To attract more overseas partners, Koo said Youku had a team dedicated to removing pirated content from its website. Youku would also complete a licensing deal within two months to show movies online from a major U.S. film company, he said.
“You can’t monetise unlicensed content. It just doesn’t work that way,” he said.
Domestic media reported earlier this month that China’s search giant Baidu Inc was interested in buying Youku. Koo said the company was “open to all options” but was not in talks with any buyers.
Editing by Chris Lewis
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