Alibaba's in the news for upcoming IPO, domiance in Chinese home entertainment industry, and keeping struggling Yahoo afloat.
Quartz's John McDuling noted Alibaba is the Chinese version of "Dropbox, PayPal, Uber, Hulu, ING Direct," and the latest deal with Lionsgate makes competition for Netflix. After putting over $3 billion in content initiatives in under six months, the company is now pushing for home entertainment dominance.
And "Alibaba now wants to be the Netflix of China" compares the business-to-consumer model to Amazon, which makes sense they've been keeping up with the set-top boxes, like Amazon Fire TV, Roku or any streaming media player.
Having the boxes that will access the Lionsgate films in a high media market means the company should do well in conjunction with March's $804 million investment in production house China Vision Media and more principal funds in the internet TV company Wasu. And to add even more revenue and control share, they invested billions in the Chinese version of YouTube, YouKu Tudou.
They're definitely looking to make a deep impact through exclusive mainland China access. Creating a more in-depth relationship will benefit both companies, too. Tech savvy consumers will pay for exclusive access. Plus being a bank means that the money to supply products has fewer red tape in accessing customer statements.
And Lionsgate will definitely get a pay off in the end. Profits have fallen and are expected to fall further as the Hunger Games series wraps up filming Mockingjay (with November premieres in 2014 and 2015) and AMC's critically acclaimed Mad Men finishes airing the last season in two parts (ending in Spring 2015). Divergent's success was okay, but not as profitable as either Hunger Games or Twilight in the anticipated teen market.
In a bold move, "Yahoo! Inc. will return at least half of the cash it reaps from Alibaba Holding Ltd.’s initial public offering to shareholders." Brian Womack of Bloomberg discusses more of the payout in "Yahoo to Keep More of Alibaba After IPO, Return Cash." Even though Alibaba is going to IPO in the U.S., Yahoo's deep investment offers the struggling company some breathing room right now. Instead of selling 208 million shares, the company has decided to only release 140 million. That's a lot of bank to keep around.
With around 23 percent stake, the $168 billion valuation gives the U.S. giant the ability to move pieces as Chief Executive Officer Marissa Mayer's looks to find a niche for Yahoo in the changing market. Analyst Brian Wieser of Pivotal Research Group LLC finds the decision to hold deeper stakes wise. Stating bluntly that Alibaba "is the dominant moving piece in Yahoo’s valuation.”
Chief Financial Officer Ken Goldman says that the Sunnyvale, Cali, company will also give back "at least half of the after-tax IPO proceeds to shareholders." The idea follows the company's "overarching commitment to maximizing shareholder value through prudent capital allocation."
Shareholders are a major influx of money since the company's display ads fell 7 percent compared to 2013's second quarter profits. And surprisingly, the price-per-ad fell 24 percent. Even acquiring social media platform Tumblr hasn't helped bring profits up. So Alibaba's influx helps.
Thankfully, Alibaba's IPO is the most anticipated since Twitter's in 2013 and Facebook in 2012. That means Alibaba and Yahoo, plus Lionsgate, will benefit from quick cash influxes.