Market Insight

Alibaba’s Tmall Box Office is now available in China

September 15, 2015  | Subscribers Only

Jun Wen Woo Jun Wen Woo Senior Research Analyst – Online Video, IHS Markit

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Tmall Box Office (TBO), an online video service by Chinese ecommerce group Alibaba, has become available in a trial mode via Alibaba’s smart TVs and set-top-boxes after most recent software update. TBO is offering access to local and foreign content; it claims to have more than a thousand movies with hundreds of them being exclusive.

TBO is operating on a paid-for basis: subscription is the main business model, while some content is available on a transactional basis. There are three SVoD options available: monthly, 3-months and annual subscription plans. Current plans include a promotional discount for each subscription plan and movie vouchers, which can be used to purchase transactional movies. The promotional prices start at RMB39 (USD6.11) per month plus 2 movie vouchers; three month plan comes with 9 movie vouchers priced at RMB108 (USD16.93); while annual plan priced at RMB365 (USD57.21) with 48 movie vouchers. There is also promotional price for subscribers to continue their subscription at subsequent month at RMB33 (USD5.18). The standard monthly fee for TBO service is RMB60 (USD9.41).

Alibaba first announced its plan to enter the online video streaming industry during Shanghai International Film Festival in June 2015 (See more: https://technology.ihs.com/533234/alibaba-joins-the-chinese-online-video-battle-by-offering-a-new-svod-service-in-summer-2015)

Our analysis:

Chinese online video market has had a reputation of being reliant on free for users, advertising-based access to content. Most prominent players on the market are combining the free and paid content propositions - Youku Tudou, iQiyi, Sohu and LeTV – but the main focus, consumption and revenues remains with free content. Alibaba’s TBO is only offering content behind the paywall.

With huge ecommerce infrastructure backing TBO and investments to date, Alibaba will be attempting to make changes to the paying-averse market:

  • Alibaba’s existing platform for payment service (AliPay) - the payment process is made easy for both first-time and existing users. First-time users are able to make payment through AliPay by scanning QR code on their TVs, while existing users can pay by just pressing a few buttons on the remote control.
  • For exclusive content delivery, Alibaba has partnerships with Lionsgate and bought stake in local film production companies, Enlight and Huayi Brothers. Recently, Alibaba has inked multi-year movie licensing deal with NBC Universal International. In addition, Alibaba seeks for a more investment to finance new film projects through YuleBao, a crowdfunding platform which allows the Chinese public to invest in film projects they are interested in.
  • TBO will also have original content by the company’s film studio, Alibaba Pictures Group. In June 2014, Alibaba Group acquired approximately 60% stake in movie and television program producer, China Vision Media Group. China Vision Media Group was then renamed to Alibaba Pictures Group.

The competition on Chinese market is intensifying rapidly, even outside the advertising-based online video. Netflix has disclosed its plan to enter China in 2016, which might have pressured Alibaba to speed up its plans to launch its own streaming service and create a stronger base in China.

The Chinese market with its large population and number of internet users presents a significant growth market for online video companies. IHS forecasts that broadband penetration in China will be 42.7% in 2015, which is still lower than in Western markets, but it represents the room for growth. 

Geography
China
Organization
Alibaba
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