The China e-commerce company Alibaba Holdings Group Ltd. is hoping that people will pursue their hunger for entertainment by investing in a new fund focused on entertainment products.
The lure of Yu Le Bao, which means “entertainment treasure,” will be augmented by the potential to interact with the industry on more than a customer – or investor – basis. Investors and prospective investors are being told that they will have opportunities not only to meet with the actors in productions on the receiving end of funding, but also to have input into casting and directing choices.
And the notion is enticing in a country where the entertainment industry is booming – in 2013, box office sales in China ballooned 27% to $3.6 billion, according to the Motion Picture Association of America. That dollar figure is more than any other country except the U.S.
Alibaba was already onto the industry as a potential investment. In fact, the company bought a controlling stake in March in ChinaVision Media Group. That gives it not just content for movies and TV, but also online gaming and sports.
The online computer gaming market in China has been soaring right along with movies. While official Chinese government figures of 246% growth in online and mobile gaming in 2013 have been called suspect, research group China Internet Watch says that in 2014 the number of online gamers is projected to reach 141 million. That’s up from 68 million in 2009. And since the government has recently lifted a longtime ban on game consoles, growth is expected to continue through next year.
Alibaba’s new fund works on a variation of crowdfunding, although the company has been careful to say that its method of raising investor funds is not crowdfunding at all. The reason for that is the Chinese government’s opposition to crowdfunding, which, depending on the structure of the mechanism, could instead be regarded as illegal fundraising.
The company said in a Weibo post about the differences between Yu Le Bao and conventional crowdfunding projects that the latter offer neither returns on equity or investment nor profits for supporters. This, the company said on the Chinese version of Twitter, was the difference between Alibaba’s new fund and regular crowdfunding projects.
And returns are just what Alibaba is offering. Yu Le Bao has promised returns of 7%, far above those offered by standard Chinese accounts, which are limited to a ceiling of 3.3%. That – and perhaps the overlay of show business glamour – has attracted plenty of would-be entertainment backers, who can invest as little as 100 yuan ($16.12) and up to 1,000 yuan via an app on their smartphones using Alibaba’s mobile Taobao platform.