Alibaba Pictures, the separately-listed film investment and distribution unit of China’s tech giant Alibaba behind recent box office hit “Lost in the Stars,” is to buy Damai. The target company is a major provider of live entertainment in the country that is currently controlled by the Alibaba parent company.
The transaction is valued at $167 million, according to a regulatory filing on Tuesday, and will be paid for by the issue of new Alibaba Pictures shares.
Damai is involved in concerts, musical festivals, live house performances, plays, sports events and exhibitions in China. It “engages in the full life cycle of live performances, including production, promotion and ticketing,” and has served over 1.8 million events with over 100 million registered customers cumulatively, Alibaba Pictures said.
Alibaba Pictures president Li Jie called the diversification into live events that the Damai buy represents “a new chapter” for the Hong Kong-listed company. “By further expanding the upstream presence of the Damai brand in [the] live entertainment industry value chain, such as events production and promotion, venue operation and artist management, [Alibaba Pictures] aims to strengthen scale advantages and barriers to entry, and further build brand awareness for its offline entertainment business,” it said.
Damai was badly affected by the impact of the COVID pandemic on live events. It lost money in each of its three previous financial year to March – RMB322 million, RMB138 million and RMB99 million, respectively. But its gross revenue (GMV) in the three months from April to June has recovered strongly to overtake that of the entire 2022-23 year.
While the size of the Damai transaction is modest when compared with Alibaba’s $221 billion market capitalization, it could be a sign of things to come.
The Damai relocation comes a few months after Alibaba, one of China’s tech pioneers which has expanded into a vast number of sectors, announced the biggest corporate reshuffle of its twenty-year existence. Alibaba has begun the process of breaking itself up into six separate units, including home shopping, cloud computing and digital entertainment, which will each have its own management and be allowed to raise its own capital or even conduct separate share listings.
While the stated objective of the Alibaba breakup is to increase the independence and entrepreneurial spirit of the six new divisions, the issue of new shares to Alibaba as payment for Damai, has the effect of increasing Alibaba’s stake in Alibaba Pictures. After Alibaba Pictures expands it capital by some 9% to pay for Damai, Alibaba will own just over 54%.
Interestingly, Alibaba’s existing digital entertainment and media group, includes Alibaba Pictures as a currently Hong Kong-listed entity. But there are several of Alibaba’s entertainment businesses that Alibaba Pictures does not own.
These include a multitude of investment stakes in cinema chains, publishing operations and film and TV production companies that the group bought, it is widely believed, at the behest of the Chinese government. Whether these will be re-sold to Alibaba Pictures is unknown. Alibaba Pictures reports holding stakes in Bona Film Group, YH Entertainment Group and Shanghai Tingdong Film Co.
Another question mark hangs over Youku, China’s third largest SVOD streaming platform, which similarly belongs to Alibaba, but not to Alibaba Pictures. Like their opposite numbers in the rest of the world, China’s video streamers have had to change tack, emphasizing profitability over user growth and latterly been forced to slash content costs.