Xiaomi Partners With Youku Tudou, China’s Largest Internet TV Company

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Just last week, fast-growing Chinese hardware maker Xiaomi announced that it plans to invest $1 billion in online video content to support its smart TV ecosystem. Now we’re getting a glimpse of how Xiaomi plans to use the money. Youku Tudou, China’s largest online video company, announced today that it has entered into a strategic partnership with Xiaomi. According to the companies, Xiaomi will invest in Youku Tudou by purchasing its stock on the open market, though it did not disclose how much.

Other reports also emerged stating that Xiaomi has made a $300 million investment in Youku Tudou rival iQiyi, which is owned by Chinese search giant Baidu. Baidu had no comment.

In terms of content, the partnership with Youku-Tudou means that the two companies will develop content and technology together, including multi-screen online video services (that would involve, presumably, Xiaomi’s smartphones and smart TVs). Xiaomi will also license existing content from Youku Tudou and invest in the production and distribution of new movies and videos.

In a statement, the companies said that “Youku Tudou’s ability in producing original content will provide strong support to the Xiaomi family of hardware by making the user experience more compelling, and will help to boost average revenue per user.”

Youku Tudou says that its monthly user base is now more than 500 million, while its daily video views have passed 800 million. Youku’s app is also the secon most popular mobile app in China in terms of time spent by users, says iResearch. Meanwhile, Xiaomi currently has 85 million active users of MIUI, its Android skin.

The partnership will be the first Xiaomi project for former Sina.com editor-in-chief and executive vice president, Chen Tong, who joined Xiaomi as vice president of content investment and content operation last month. Chen and Xiaomi co-founder/VP Wang Chuan are in charge of deciding where the $1 billion Xiaomi has earmarked for entertainment content will go.

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. But its native content for its smart TV ecosystem is still relatively sparse, because before today’s deal Xiaomi did not have a partnership with an online video site.

On the other hand, Baidu’s smart TV, called TV+, streams content from iQiyi and PPS, Youku Tudou’s main rival. 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.