Xiaomi To Invest $1B In Online Video Content

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Xiaomi just announced on its official Weibo account that it plans to invest $1 billion in online video content to support its smart television ecosystem.

The investment will be overseen by two Xiaomi executives who have considerable experience building online content. They are Chen Tong, the former editor-in-chief of news portal Sina.com, who Xiaomi hired away last month, and Wang Chuan, the director for Xiaomi’s smart TV products, including the Mi TV and Mi Box. Before becoming a co-founder and vice president of Xiaomi, Wang founded Beijing Doukan Technology in 2010, which develops reading and video apps, including the Doukan online bookstore, which Xiaomi acquired in 2012.

Xiaomi’s smart TVs, which first launched in September 2013, are part of its plan to create a hardware ecosystem around MIUI, its Android skin, which syncs between its smartphones, tablets, smart TVs, and smart wi-fi routers. The company’s business model is to sell hardware at-cost, which means that it is important for the company to create software and online content—including online video—that will eventually generate revenue. [Note: According to a WSJ report, Xiaomi does in fact make money from its cheap smartphones, but it’s unclear how much it makes from other hardware products.]

At stake is China’s rapidly growing smart TV market. According to Digital TV Research, China is now the world’s largest smart TV and OTT (over-the-top) content, with 20 million to 30 million sets sold each year.

Xiaomi’s smart TVs compete against rival platforms from domestic competitors Baidu and Alibaba, as well as Samsung and Apple. Baidu’s smart TV, called TV+, has an edge because it streams content from iQiyi and PPS, which combined create China’s largest online video provider. In addition to online video, TV+ also gives users free access to movies and TV series.

Alibaba’s smart TV operating system, on the other hand, has the advantage of the company’s e-commerce and online payment assets, like Tmall, Taobao, and Alipay, which allows users to shop for goods and pay bills through their television sets. Hardware makers are also competing with content providers like Youku Tudou, one of China’s largest Internet television companies, which earlier this year signed strategic partnerships with several of China’s largest smart TV manufacturers, including Huawei Technologies, ZTE 9 Network Technology, Goldweb Technologies; and Jiuzhou Electronic Technology.

We’ve contacted Xiaomi for more information and will update this post if we hear back from them.