A shifting trend of internet companies into the movie making industry has now developed further. Many of these online companies are jumping onto the big screen as well as making films specifically for smartphone use. This is also seen as an opportunity for brands to get more screen time with consumers on screens of all sizes.

Youku Tudou, China’s largest video hosting website, announced the creation of its own film studio August 28th in a move to capture a larger slice of the film industry.

Victor Koo, chairman and chief executive of the company, said the film division, Heyi Film, would produce eight films per year destined for the big screen and a further nine aimed to premiere on the internet. The group, which last week announced a loss of $26m for the second quarter despite increased revenues, has not revealed how much it plans to spend on the project.

Mr Koo said Youku had $1.6bn in cash to spend after a $1.2bn investment by ecommerce group Alibaba in April. “We’re very strong,” he said.

Youku Tudou, formed by the merger of China’s two largest video sites in 2012, claims 500m users.

Youku had been making its own content since 2009, starting with “microfilms” lasting a few minutes, and last year helped produce eight feature films that had a combined box office of 2bn, Mr Koo said. It planned a number of new releases in the coming months such as Golden Era, a film about China writers in the 1920s scheduled for release in October, and The Taking of Tiger Mountain, a 3D epic.

Producing films for smartphone screens required a different approach, with smartphones running videos getting very hot after 20 mins, said Mr Zhu. Surprise, broken into six-minute episodes, had gained 700m views.

Virtually all of China’s video hosting sites make their own content, and this year has seen a trend to build separate studios or to acquire content producers. In July Iqiyi, which counts Baidu, China’s largest search engine, as an investor, launched an in-house studio with eight films in the works. In June Alibaba completed the acquisition of a majority stake in ChinaVision , a video content maker.

The bid to move from small smartphone screens to big screens, and the reverse, is driven partly by strong growth over the past three years in films. China’s industry is the second largest after the United States, expected to gross between Rmb28bn to Rmb30bn this year. Cinemas are multiplying, at an average rate of 18 screens a day.

With the China market in its early stages, the field was wide open for new participants, said Mr Koo. “The US film industry is highly developed. It tends to be either blockbusters or franchise films. But in China you’re talking about small to mid to large budgets. All those different budgets work. It’s a much earlier phase in terms of the development of the film industry, and growth is much faster.”

Mr Koo said internet groups had advantages, such as large amounts of big data and ability to help publicise films to the internet audience. “All this helps the success rate and reduces the risk normally associated with film investment. That means for an internet company working in films, your success rate is likely to be higher.”

Read the full article from the Financial Times here.

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