Tencent Holdings Ltd. and Alibaba Group Holding Ltd. -- two Chinese Internet giants -- compete on many fronts, from social media to mobile payments. Their latest and perhaps most interesting theater of conflict is the battle to offer U.S. film and TV content to the public in mainland China.
The tussle has roped in some big names: Tencent licensed Time Warner unit HBO’s catalog of TV series and movies -- including hits like “Game Of Thrones” and “True Detective” -- for Tencent Video. The deal comes months after Alibaba inked a deal with Lions Gate Entertainment -- creator of “Twilight” and “Mad Men” – as part of its bid to feed growing Chinese demand for U.S. content.
One winner here is Hollywood, which has found a fast-growing and aggressive new market for its product. Chinese companies have invested more than $1 billion in foreign content in the last two years; that’s a huge shift for a market once written off as little more than a haven for piracy.
Alibaba and Tencent are attacking entertainment from their own bases of dominance: the former in e-commerce and payments, the latter in messaging, social networking and mobile gaming. But they’re coming to the same conclusion that Apple, Amazon and Google did in the U.S.: to lure and retain users they need to meet the demand for American TV and films.
"There's a big demand from Chinese consumers for American content," said Joel Backaler, consultant and author of "China Goes West." "You're also seeing a crackdown on pirated video and media content and because of that a higher demand for licensed content."
Last month, Alibaba CEO Jack Ma signaled his intent by visiting Hollywood on a fact-finding mission. “I come here to learn. I want to come here looking for partners,” he said. Because of its September IPO on the New York Stock Exchange, Alibaba's business and brand are better known in the U.S. than Tencent, which is listed in Hong Kong. Tencent is more entertainment-focused with its QQ Games portal and messaging service WeChat, and can be expected to be a big competitor to Alibaba for content.
Tencent is, by one estimate, the biggest single game company in the world by revenue. The holding company has been licensing U.S. entertainment properties and investing in companies for years. Tencent owns "League of Legends" publisher Riot Games and owns stakes in Activision Blizzard, publisher of "Call of Duty" and "World of Warcraft," and Epic Games, maker of "Gears of War."