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Alibaba Pictures Signs 3-Year Cooperation Agreement With Parent Company

Chinese film company is giving Alibaba’s streaming service dibs on distribution for upcoming projects

Alibaba Pictures announced a three-year agreement to cooperate closely with parent Alibaba Group in the production, distribution and marketing of its films, doubling down on its own IP at a time when strict capital regulations and a softening movie market have created roadblocks for some of the country’s biggest and most ambitious entertainment companies.

According to a letter Alibaba Pictures CEO Yu Yongfu sent to employees, Alibaba Pictures and Alibaba Group will have “in-depth cooperation on the related rights of the film and television content that each party possesses.” Alibaba Group includes a literature and gaming division as well as streaming service Youku Tudou, one of the country’s leading over-the-top providers in one of the few places where Netflix does not operate.

“For content development, investment, production and distribution, Alibaba Pictures will be given priority for those copyrights that Youku, Alibaba Literature and Alibaba Games own; for the copyrights which it owns, Alibaba Pictures will give priority to Youku Tudou Inc. for exclusive distribution or investment under the same conditions,” Yu said in the email.

Yu, who was named Alibaba Pictures CEO in December, also said the companies will “accelerate the development of ‘One Film Industry'” by folding Heyi Pictures, which had been under the Youku Tudou umbrella, into Alibaba Pictures. Heyi chief Liu Kailuo will report directly to Yu.

Alibaba Pictures has its own listing on the Hong Kong and Singapore stock markets, although Alibaba Group is its majority owner.

Earlier this year, Alibaba sent a profit warning to its shareholders, letting them know the company was expecting to take a $140 million net loss in 2016, which it blamed partially on start-up and promotional costs for an online ticketing business. China’s movie market has relied on heavily subsidized online tickets to help drive the box office, but those subsidies became less generous last year.

And late last year, Yu announced plans to invest about $7.2 billion in entertainment over the next three years, telling employees “he didn’t come to play” in an email.

Like several other film companies, Alibaba Pictures’ market value has dipped over the past few months, going from 39.9 billion yuan (about $5.8 billion) in September to 33.3 billion yuan ($4.8 billion) in March, as slowing growth — the country’s box office was essentially flat last year — and stricter regulations have dialed down investors’ enthusiasm for the movie business. China’s top 30 media companies have seen their market caps reduced by 13 percent, according to a Chinese media report shared with TheWrap.