Alibaba replaces video streaming boss amid anti-corruption probe

A top-level reshuffle is sending shockwaves across one of China’s biggest online video businesses. Yang Weidong has stepped down as the president of Alibaba’s video streaming unit Youku, the e-commerce operator’s digital media and entertainment business group confirmed to TechCrunch on Tuesday.

Yang is understood to be assisting the police with an investigation into “an alleged case of seeking economic benefits,” said a spokesperson for the business group.

Taking over Yang’s helm is Fan Luyuan, chairman and chief executive officer of Alibaba Pictures, the giant’s film division that scooped up a minority share in Steven Spielberg’s Amblin Partners to set foot in Hollywood. Fan remains in his roles with the film group following the additional appointment.

Yang, who formerly held executive positions at Nokia Greater China and Chinese computer maker Lenovo, joined Youku in 2013. He had since risen through the ranks at the online video service, which Alibaba fully acquired in 2015.

This is not the first time that Youku has grappled with the fallout of executive misconducts. In 2016, Chinese authorities detained the video site’s former vice president Lu Fanxi after a corporate audit revealed “serious suspicions surrounding certain production projects” that Lu oversaw, according to an internal email obtained by multiple Chinese news outlets.

While more details are emerging about Yang’s case, industry veterans suggest that corruption has become an unspoken rule in China’s online video sector, which has seen players race to capture users with topnotch content and talents.

“This can include bribes for actors as well as yin-yang contracts between studios and the actors,” a Shenzhen-based venture capitalist who invests in digital media told TechCrunch, asking not to be named due to the sensitivity of the topic. Yin-yang contracts refer to those that present one compensation arrangement to tax bureaus while secretly pursuing another more lucrative one.

An ongoing crackdown on this unscrupulous practice is underway in China. In October, regulators fined top-earning actress Fan Bingbing nearly $70 million over tax evasion and warned others in the booming film and television industry to come clean or face similar charges.

Yang’s fall is also hot on the heels of an anti-graft probe at Meituan Dianping. On Monday, the Hong Kong-listed neighborhood services titan announced sacking the director of its food delivery segment — the firm’s main source of revenues — for corruption.

The past few years have seen Alibaba, Baidu, Tencent and a host of other tech heavyweights commit to voluntary anti-corruption purge, likely an answer to President Xi Jinping’s call to end cheats across all facets of society.

Soaring content expenses have jacked up losses for Alibaba’s digital media and entertainment arm, which includes Alibaba Pictures, Youku and Ali Music Group. Operating losses for the division during the third quarter grew to 4.8 billion yuan or $700 million, up 150 million yuan year-over-year.

Baidu’s video unit iQiyi has also shown signs of stress after it announced issuing a sizable convertible note to raise more capital for content investment.

Youku is in a fierce race with iQiyi and Tencent’s video streaming site. All have shelled out big bucks to churn out TV dramas and variety shows. While iQiyi and Tencent claim to have crossed the 80 million subscriber mark, Youku has been keeping mum about its size in recent quarters.