China's own "Game of Thrones" is emerging, as Internet kings Tencent and Alibaba battle to bring Hollywood hits to the vast online audience in their home country.
On Tuesday, Tencent (TCEHY) and Time Warner's (TWX) HBO reached a distribution deal, in which Tencent Video will be China's exclusive online platform for hits like "Game of Thrones," "Entourage" and "Girls." Financial terms weren't disclosed.
"This is about the strength of Tencent's content," JG Capital analyst Henry Guo told IBD. "The nature of this (Internet) business is that whoever has the content, the traffic will follow.
"If you have a top drama in your library, you will have industry-leading traffic.
Tencent shares dipped 0.4%, while Time Warner rallied 1.6%.
Before being broadcast onto PCs, smartphones and mobile devices, HBO's content must be approved by the Chinese government. Though it's possible some shows could be banned, the companies said "Game of Thrones" and "The Newsroom" are set to reach Chinese audiences.
The deal is also expected to cut down on video piracy in China.
"This partnership with Tencent Video ensures that Chinese fans will now be able to enjoy our dramas at the high level of quality they were meant to be experienced," Charles Schreger, HBO's president of programming sales, said in a statement.
And as HBO develops over-the-top streaming that would bypass the likes of Netflix (NFLX), Tencent will give HBO access to a largely untapped market.
Tuesday's pact follows Alibaba's (BABA) deal in July with Lions Gate Entertainment (LGF), the studio behind the "Hunger Games" and "Twilight" franchises, to stream movies to the Chinese e-commerce giant's set-top box video-on-demand platform.
Meanwhile, top Chinese smartphone vendor Xiaomi is investing $300 million in Baidu's (BIDU) video portal. Xiaomi also plans to invest $1 billion to acquire content for Xiaomi TV.
So who is winning the battle in the Chinese online video space
"At this moment in terms of online entertainment, online radio, online digital content — from that angle — Tencent has the advantage," Guo said, adding that Tencent is an entertainment-focused company, while Alibaba has focused on e-commerce.
But Guo expects the two giants "to have more and more overlap," with Tencent moving into e-commerce and Alibaba moving into entertainment.
Indeed, Alibaba CEO Jack Ma romped around Hollywood last month with the entertainment industry's elite, reportedly meeting with Lionsgate, Sony Pictures, Fox, Paramount and Universal chiefs. Ma is now seen wanting a 37% Lionsgate stake.
Tencent and Alibaba already have vast Internet empires that compete on several fronts.
Tencent's QQ and WeChat lead in Chinese mobile gaming and mobile chat. It also owns social networks, web portals and other Internet services. Alibaba owns a stake in Weibo (WB), a service similar to Twitter (TWTR) that competes with WeChat and QQ.
Alibaba dominates Chinese e-commerce with sites like Taobao and Tmall, while Tencent has stakes in JD.com (JD) and 58.com (WUBA) — Chinese versions of Amazon (AMZN) and Craigslist.
Both have online payment platforms: Alipay and Tenpay.