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In Yao Chen’ blog post on online video industry in China, she talked about the competition between the TV industry and the online video industry, and the Youku–Tudou merger issue. In my opinion, the merger of Youku and Tudou is beneficial to both of the two companies, but they will face challenges in the long run. The merger endows Youku Tudou Inc the absolute advantage in terms of user base, therefore helps to increase its media value substantially. With simplified media choice, Youku Tudou Inc. (the new name of the company) will get more budgets for video, and be more attractive to direct customers such as large brand advertisers. After the merger, Youku Tudou Inc takes a stable lead in the industry, while other companies with abundant cash flow and aggressive pose, such as iQIYI, Sohu, LeTV, and Tencent take the second place. In addition, the competition arising from copyrights of some popular videos is among the above companies as well. Therefore, iResearch considers that although the merger uplifts Youku Tudou’s bargaining power in the copyright market, there will still be extraordinarily fierce competition in the copyright market, and the cost of hot videos will not drop dramatically in the short run.
As for the prospect of the merger, the revenue of the Youku Tudou will be definitely increased and cost cut in the short term. However in the long run, the biggest challenge for Youku and Tudou is how to integrate their resources. Due to the overlap of human resources and operational resources, how to rationally allocate these resources is the first challenge in front of the management. iResearch believes that the position of Youku Tudou in the online video market will be directly determined by the efficiency and results of the resource integration in the future.
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