Youku Tudou, already one of China’s largest streaming video sites, is moving into hardware as well. The company said that its first three devices—a WiFi router, smart TV box, and 15.6-inch Android tablet—will be available next January. To provide content for those devices, the company is also launching a cloud entertainment business unit, which will create services that make it easier to stream videos and games from Youku Tudou’s main sites. The WiFi router will be part of a P2P-based network that is supposed to make video stream faster while reducing Youku Tudou’s bandwidth usage. The smart TV set, which supports 4K/Ultra HD video, will eventually start using Alibaba’s Aliyun operating system, which includes online shopping connected to the e-commerce giant’s sites, as well as its Xiami streaming music service. Youku Tudou says its monthly user base is now more than 500 million, with daily video views surpassing 800 million. In a prepared statement, Youku Tudou CTO and president of its cloud entertainment unit Leo Yao, said, “Now that Youku Tudou has built the largest user community of online video in China, this expansion will ensure that Youku Tudou’s content and services reach all Internet enabled screens in the forms that our users want, and offer a seamless experience across devices.” Youku Tudou’s decision to enter the hardware business comes at a time of rapid growth for China’s streaming video market. According to Digital TV Research, China is now the world’s biggest smart TV and OTT (over-the-top) content market, with 20 million to 30 million sets sold each year. Several of China’s largest Internet companies have struck content partnerships over the past couple of months in a bid to win over as many viewers as possible. For example, Xiaomi, which early in November announced plans to sink $1 billion in building online video content, has already made strategic investments in Youku Tudou as well as Baidu’s IQIYI, one of its main rivals. Meanwhile, Tencent struck deals with HBO and Warner Music Group to distribute their content in China. Alibaba and Baidu also have smart TV sets of their own. Other top smart TV makers that Youku Tudou has signed deals with include Huawei Technologies, ZTE 9 Network Technology, Goldweb Technologies; and Jiuzhou Electronic Technology. Youku Tudou’s agreements with different hardware and software companies (including Aliyun and Xiaomi) is interesting because it might be an indicator of future consolidation as China’s smart TV industry becomes more massive and fragmented. The last round of major mergers in the space occurred in 2012 and 2013, when Youku bought Tudou in a $1 billion stock deal and Baidu purchased PPS to fold into iQIYI. Banding together can also help companies that have a stake in China’s streaming-video industry deal with regulators. Though the Chinese government closely monitors what is shown on TV channels, it has so far been more flexible with online video. But that will most likely change as more people rely on the Internet to watch television shows and movies. For example, China may decide to limit the amount of foreign-produced shows that streaming sites can offer.
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