Money

Shanda plans expansion, inches close to Ku6 buy

By Chen Limin (China Daily)
Updated: 2009-11-27 08:02

Chinese media company Shanda Interactive Entertainment Ltd is acquiring video website Ku6.com, in an effort to expand its market share in the interactive entertainment segment.

Shanda has agreed to buy Ku6.com, a source familiar with the matter told China Daily yesterday, declining to reveal more details.

Media reports have said that Hurray! Solutions Ltd, a subsidiary of Shanda, will pay $44 million for a 58 percent stake in Ku6.com.

Spokespersons of Shanda and Ku6.com refused to comment on the matter when contacted.

"Shanda aims to become a comprehensive entertainment company, and online video is an integral part of the interactive entertainment business," said Cao Fei, an analyst with research firm Analysys International.

Ku6.com is funded largely by foreign private equity firms, and ranks third in China's Internet video market after Tudou.com and Youku.com. The company earned advertisement revenue of over 100 million yuan last year.

Shanda has been stepping up its diversification pace in the last few years as it seeks to expand its reach beyond the online gaming mart.

Chen Tianqiao, founder and CEO of Shanda, said earlier: "We are going to try different businesses, including online and offline, publishing, games, television and movies."

Earlier this month, it entered the film and television business by setting up a 600-million-yuan joint venture with Golden Eagle Broadcasting System. The company also roped in famous television director Long Danni of the Super Girl TV program to head the new joint venture.

Shanda had in June acquired Internet and mobile networks music provider Hurray! Solutions Ltd.

The company also runs three major literature websites under its umbrella and has an over 80 to 90 percent share of the Internet literature market in the country.

By shifting to more diversified entertainment platforms, the company aims to better integrate its content resources, offer customers more choice and expand revenue streams, said Cao.

Shanda reported net revenue of 1.24 billion yuan in the second quarter of this year, with nearly 95 percent coming from its online gaming business.

However, analysts feel that despite its diversification plans, the online gaming business would continue to be the main revenue earner. Since most of the diversified platforms may take some time to generate revenues, the online gaming business would continue to bankroll most of Shanda's diversification programs, said Cao.

Wang Xing contributed to the story