Youku making $1.6 billion investment in user-generated content over three years

Youku Tudou Inc, the Chinese online streaming site, is investing 10 billion yuan ( $1.6 billion) into being able to stream more and better user-generated content over the next three years.

As technological advancements empower more users to produce videos, the Beijing-based company's Chief Executive Office Gu Yongqiang said the future of the entertainment industry will center around what he called "we media", meaning that most content will come from users rather than established organizations.

To tap into this growing trend, Gu said the company will roll out plans to help grow 100 'we media' brands, each valued at more than 100 million yuan, and 10,000 others whose monthly revenues will exceed 10,000 yuan.

Liu Cuiping, an analyst at entertainment market researcher EntGroup Inc, described Youku's hefty new investment as a well-calculated decision.

"High-quality, user-generated content is an important asset to attract audiences who are turning to online platforms for entertainment," Liu said.

According to the China Internet Network Information Center, by the end of the June, there were 428 million online video viewers across the country, with mobile viewers accounting for 76.8 percent of those.

"Compared with buying copyrights of existing TV shows and films, user-generated content is less expensive, but more importantly it can be exclusively targeted at online audiences and is produced in a fashion that online viewers find more appealing," Liu said.

The Youku plan comes as an increasing number of Chinese TV broadcasters start to produce talkshows, TV dramas, and reality shows for video sites, and these are being seen as an increasingly important part of user-generated content.

"Programs developed by these professional users are becoming more popular and that will be the focus of Youku's investments," Liu said.

More than half of Youku's content is currently user-generated, but 10 of its more popular professional-user programs are already valued at more than 100 million yuan.

Gu said the popularity of such programs has raked in the company around the same amount in revenue.

"In the next three years, revenues from subscribed users and user-generated content will surpass advertising income," he said.

Youku's main industry rivals are also pouring cash into the sector to catch up with it.

Tencent Holdings Ltd, Sohu.com Inc and Leshi Internet Information & Technology Corp, have all invested heavily so far, and EntGroup estimates that all streaming sites in China are likely to spend some 2 billion yuan this year on producing self-made content, teaming up with professional program makers.

Ma Si contributed to this story.