Alibaba Group Holding dominates China's e-commerce sector. But the Internet giant has gone beyond its core business in recent years, reaching out into other fields such as Internet finance, social networking, logistics and entertainment. Together, these investments might seem random, but analysts said they will pay off down the line. The entertainment industry has great growth potential for Alibaba, experts said, and has possibilities to benefit its e-commerce business one day.
On Thursday, while the whole country was in their revelry for the weeklong Spring Festival holidays, a piece of news disturbed the Internet sector.
Ali Music, a division of e-commerce giant Alibaba Group Holding, announced that it has formed a strategic partnership with K-pop giant S.M. Entertainment Co (SM). Alibaba invested 35.5 billion won ($28 million) for a 4 percent share in the South Korean company.
The two firms will cooperate in areas such as online music distribution and promotion, according to a press release Alibaba sent out on Thursday.
The agreement will also help SM get more of a foothold in the Chinese market.
The deal also gives Ali Music access to SM's music catalogue. As one of South Korea's three major entertainment companies, it is home to popular groups like Super Junior, EXO and Girls' Generation.
Ttpod.com and xiami.com, two of Ali Music's music streaming sites, have already made SM's entire music catalogue available through their services, according to a microblog posted on Thursday by Gao Xiaosong, chairman of Ali Music and also a singer and songwriter.
Moving into music
Ali Music was founded in March 2015. Compared with archrivals Tencent Holdings and Baidu Inc, which launched their music services long ago, Alibaba was a latecomer to the music business.
The deal with SM is important for Ali Music, because Korean pop music, or K-pop, has grown in popularity among young Chinese, who are the major demographic group using online music services. They are also more willing to pay.
Alibaba's rivals have already gotten a toehold in the business.
In December 2014, Tencent announced a deal with South Korea's YG Entertainment, which is home to the popular group Bigbang and singer Psy. Baidu announced its partnership with SM in May 2014.
The three Internet giants have all increased investment in intellectual property as the Chinese government has stepped up enforcement on violators.
On July 8, 2015, the National Copyright Administration ordered online music services to remove all unauthorized music before July 31, 2015.
More than 2.2 million unauthorized songs were removed from the Internet, media reports said. Ali Music alone removed 26,000 songs from its platforms.
Ali Music has made deals with Rock Records Co and BMG in the beginning of 2015.
"Ali Music has invested heavily in copyrights, but so far their efforts have failed to attract a large user base," said Zhang Yi, CEO of Guangzhou-based market research firm iiMedia Research.
Music sites kugou.com and kuwo.cn, as well as Tencent's QQ music, dominated the online music business in 2015, according to a report from iResearch Consulting Group in December.
Ali Music's two sites ranked in the second and third tier in terms of users, with ttpod.com performing a bit better than xiami.com.
Ali Music is facing strong competition in the sector, as its major rivals are all loaded, Zhang told the Global Times on Sunday.
