China's leading video-streaming website is inking a deal with Comcast's
NBCUniversal will also offer up some of its more recent releases including Battleship and The Lorax after the newer movies complete their theatrical releases in China.
NBCUniversal isn't the first studio to broker a Youku Premium deal. Time Warner
Youku shares may have opened higher on this morning's news, but an hour into the trading day those gains were gone.
Investors have a right to be jaded. Youku's stock may have peaked at nearly $70 last year -- months after its ballyhooed IPO -- but it has gone on to shed more than two-thirds of its value. Even the obvious synergies of acquiring meaty rival Tudou earlier this year can't seem to get the stock moving again.
If you want to know what's holding back Youku, just check out the company's bottom line. Analysts don't see Youku turning a profit until next year, but cynicism is warranted here. Those same analysts have overestimated the company's profit potential for three consecutive quarters.
Streaming video is a hard sell for advertisers in our more advanced online advertising market, so you can imagine the monetization challenges in China. Ad-supported clips that make the most of Youku's content aren't very lucrative, and getting folks to pay real money through Youku Premium given China's rampant video piracy is easier said than done.
The upside here is that NBCUniversal's arrival validates Youku Premium as a platform. This is the fifth major U.S. studio to broker a licensing deal with the popular Chinese company. However, until we see folks paying enough to make the fallen dot-com darling profitable, it's best to treat Youku as the risky wager that it has become.
Bullish on China
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