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Media Losses Expand as Alibaba Revenues Leap 60% in First Quarter

Patrick Frater

Chinese e-commerce giant Alibaba reported revenues of $12.2 billion in the three months to end of June, a year-on-year leap of 61%. Group profits were flat, and losses in the media and entertainment division grew.

The three months, which equate to the first quarter of Alibaba’s financial year, delivered group-wide net profits of $1.16 billion, or $3.04 billion on a non-GAAP basis.

Alibaba’s share price has been battered by fears of the fallout of the U.S.-China trade war. The NYSE-traded ADRs stood at $177.85 at Wednesday’s trading close, a drop of 9.9% over the past 12 months, at a time when the Dow Jones Index has risen by 3.7% and the tech heavy NASDAQ composite index has risen by 6.3%.

Initial reaction to the results announcement, in pre-market trading, lifted the ADR price by 5.4% to $1.83.12

The group regards media and entertainment as a key growth area serving the aspirations of China’s large and growing middle class. But it is not in a hurry to extract profits from the sector, as it also believes that video enriches its users’ environment and online experience, stimulating purchases through the e-commerce operations. For the full financial year to end of March 2018, EBITDA losses in entertainment grew to $1.32 billion, on revenues of $3.21 billion (RMB19.6 billion).

Since the end of the financial year in March, Alibaba announced the $2.23 billion purchase of a minority stake in Focus Media, a company which operates video screens in elevators and subways across the country. It also gave a dramatic boost to the visibility of its mainstream streaming video operation Youku, by snaring the online rights to the soccer World Cup.

Alibaba’s movie division is poised to be a key marketing and distribution partner on the Chinese release of “Mission: Impossible — Fallout” on which Alibaba Pictures was also an investor. The film has its China outing on Aug. 31. This week Alibaba Pictures confirmed plans to partner with Entertainment One on a Chinese animated movie based on the “Peppa Pig” character. That will launch in February 2019, at the peak Chinese New Year period.

 

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