Investors Support Youku and Tudou Video Firms Merger

Youku NYSE

Youku NYSE

Two of the most successful online video firms in China have managed to get the approval of their stakeholders regarding their online video firms merger plan which is aimed at establishing one of the biggest industry leaders of online video firms in the country.

The Chinese merger plan between the largest online video firms, Tudou and Youku, announced back in March of this year, will see Youku taking over Tudou, one of its rival online video firms in China, by means of a stock exchange agreement which is currently estimated around £640 million or $1 billion.

Both companies have experienced considerable amount of loss due to increasing costs associated with obtaining and streaming video content. The online video firms merger plan is likely to result in a larger market share while cutting costs at the same time.

Outcome of the Merger

The combined operation is believed to assist companies with reducing costs in areas like bandwidth, server purchases and copyrights. Some projections indicate that the Chinese merger plan may provide both companies with the opportunity of saving between $50 million to $60 million over the course of the next 18 months. Not only that but the joint venture is projected to offer a market share of over 35% which will lead to the organization possessing a greater amount of bargaining power with prospective promoters. The move should be able to help improve their profits and moderate their losses.

The Youku video company, at the beginning of this month, reported a total loss of more than 62.8 million yuan for the duration between April to June, which is roughly equivalent to £6.3 million or $9.9 million. The net loss of the company during the same time span last year was only 28.1 million yuan. On the other hand, according to Tudou, its combined loss for the second quarter expanded to 154.7 million yuan, compared with a loss of 78.9 million yuan for the duration of the same period last year.

The President of Youku, Liu Dele, apparently stated that the merger was expected to help companies pick up their fortunes. He added that the more quickly they achieved synergies, the faster they would be able to break even.

Challenges down the Road

Analysts projected that even though the merger was probably going to have a positive impact, companies were expected to meet with quite a few challenges. Both Youku and Tudou have been aggressive competitors for many years and they have also dragged each other to court before. Experts who are aware of the situation claim that the biggest concern will be the combination of their businesses. They fear that as companies, Youku and Tudou, come together and unite their numerous operations, a few jobs may be lost. The management will have to deal with the tough burden of deciding who remains and who gets the ticket. Also, following the announcement of companies regarding their merger back in March, a number of other challengers in the sector have been making an effort to join their forces as well, which is expected to make the competition a whole lot tougher.

Aubrey Chang
Aubrey Chang, Associate Editor Industry Leaders Magazine (www.industryleadersmagazine.com)

Leave a Reply

Your email address will not be published.

Recent Posts

Broadcom bought VMware to Expand Its Footprint in Software

Broadcom bought VMware to Expand Its Footprint in Software

After the deal is finalized, VMware shareholders will elect to receive either $142.50 in cash or 0.252 Broadcom stock for each VMware share. Under the deal, Broadcom will also take
19 hours ago
Epic Games CEO Tim Sweeney Condemns App Store

Epic Games CEO Tim Sweeney Condemns App Store

Sweeney adds, “The problem here is a classic monopoly tie. You start with hardware. Apple makes smartphones and they profit from their smartphones — and they deserve to. But th
23 hours ago
An Unexpected Bolt: Fintech Unicorn Bolt Issues Lay off Notice

An Unexpected Bolt: Fintech Unicorn Bolt Issues Lay off Notice

The New York Post reported that the Bolt layoff will see restructuring across US, Canada and Europe. They expect that roughly one-third of the entire workforce will be impacted by
23 hours ago
Beeple Getting Hacked Resulted in His Followers Losing Over $438,000 in Crypto

Beeple Getting Hacked Resulted in His Followers Losing Over $438,000 in Crypto

Two tweets were posted using NFT artist Beeple’s account. The first one promoted an exclusive collection with Louis Vuitton. The second tweet announced that Beeple would soon rel
2 days ago
Microsoft Selling Metaverse to Kawasaki: It’s A Whole New World

Microsoft Selling Metaverse to Kawasaki: It’s A Whole New World

Microsoft’s corporate vice president of mixed reality, Jessica Hawk, recently told CNBC that the metaverse will change how people function across a variety of devices and platfor
2 days ago
Cryptocurrency Market Updates: Bitcoin Could Hit $500,000 Per Coin

Cryptocurrency Market Updates: Bitcoin Could Hit $500,000 Per Coin

On March 15, Novogratz went so far as to predict that the Bitcoin future price will reach half a million dollars per coin by 2027. He made this statement at the Bitcoin 2022 confer
3 days ago