Chinese e-commerce and entertainment giant Alibaba has taken a $1.2 billion goodwill impairment charge against its video-streaming operation Youku.
The move was disclosed on Wednesday as Alibaba revealed its financial results for the October to December 2023 period, the third quarter of its current financial year.
Group revenues in the quarter were up by 5% at RMB260 billion ($36.7 billion). But net profits and earnings per share slumped. Net income to ordinary shareholders fell by 69% year on year from RMB46.8 billion to RMB14.4 billion or $1.51 billion. Per share earnings were down by 68% to RMB0.71 or $0.1 for its Hong Kong-traded shares or RMB5.65 or $0.8 for its New York-traded ADS.
Calling the performance “a solid quarter,” new CEO Eddie Wu, said, “Our top priority is to reignite the growth of our core businesses, e-commerce and cloud computing. We will step up investment to improve users’ core experiences to drive growth in Taobao and Tmall Group and strengthen market leadership in the coming year. We will also focus our resources on developing public cloud products and sustaining the strong growth momentum in international commerce.”
Revenue from Alibaba’s “digital media and entertainment” cluster increased by 18% to RMB5.04 billion ($710 million), “primarily driven by the strong revenue growth of offline entertainment businesses of Alibaba Pictures.” Its Damai subsidiary was involved in selling ticket for almost all the major music concerts in China. And total box office of movies produced, promoted and distributed by Alibaba Pictures’ movie segment “accounted for more than half of China’s total box office during the quarter,” it said.
Quarterly digital media and entertainment losses increased from RMB391 in the equivalent quarter last year to RMB517 million ($73 million), “primarily due to the increased losses of Youku.”
Youku is understood to lie third among China’s mainstream streamers, behind Tencent Video and iQiyi, but Alibaba has never disclosed Youku’s subscriber, monthly active user or advertising numbers. And while its rivals are flirting with quarterly profits, Alibaba appears to see little prospect of that in the near term.
In notes to the latest profit statement, Alibaba said that it had taken a RMB8.49 billion ($1.196 billion) impairment charge to the goodwill of Youku.
Alibaba completed its purchase of New York Stock Exchange-listed Youku Tudou (formed from the merger of two smaller streamers) in November 2015 and attributed it a valuation of $5.50 billion at the time. For the 2015 calendar year, Youku reported losses of RMB837 million, following losses of RMB600 million in 2014.
