Alibaba subsidiary faces tough challenges in a crowded online video marketplace

Chinese online video service provider Youku Tudou Inc is eyeing a domestic stock listing within three years to boost its competitiveness in the country's cash-burning video sector.

The announcement came as e-commerce giant Alibaba Group Holding Ltd said on Wednesday it has completed the buyout of Youku Tudou, making the Beijing-based video company one of its wholly owned subsidiaries.

"China is entering into a golden era for the entertainment industry. The flexible domestic stock market will help Youku Tudou quickly execute strategies and expand presence," Victor Koo, CEO and chairman of the company, said on Wednesday. He did not disclose details on where a listing might be.

In a statement, Youku Tudou said it has requested its shares to be suspended on the New York Stock Exchange, marking an end to the company's six-year run on the US bourse.

Alibaba proposed to acquire all outstanding shares in the video platform that it did not already own in October.

Analysts said it remains unclear how Youku Tudou will manage to go public in China given that currently only profitable companies are allowed to be listed on the mainland's major stock markets but Youku Tudou is now in the red.

In the first three quarters of 2015, Youku Tudou posted a loss of more than $200 million, according to the company's financial reports.

But Shen Meng, director of Chanson & Co, a boutique investment bank in China, said it is possible for Youku Tudou to break even within three years as Chinese consumers are more willing to pay for Internet video content.

The move also comes at a time when Youku Tudou is locked in fierce competition with Baidu Inc-backed iQiyi, and Tencent Video, a streaming site ran by Tencent Holdings Ltd. Eager to attract more users, they are all paying big checks to buy the copyrights of popular dramas and entertainment shows.

Pang Yiming, a senior analyst at Beijing-based Internet consultancy Analysys International, said Youku Tudou, the once-champion of China's video sector, is currently losing ground to its major rivals.

"Due to its conservative strategies in the past years, Youku Tudou has been falling behind iQiyi and Tencent Video in efforts such as purchasing quality content and migrating its services to smartphones."

[email protected]