Alibaba Group Holding Ltd. and Tencent Holdings Ltd. plan to
invest in China Media Capital's Internet-TV startup, according to
people with knowledge of the matter, in a rare collaboration
between the two Chinese Internet giants.
Li Ruigang, chairman of state-backed private-equity fund CMC,
said it founded a startup called Whaley Technology earlier this
year to make smart televisions, with the first product set to be
unveiled Thursday. Alibaba and Tencent, both of which reported
their latest quarterly earnings Wednesday, plan to put capital,
technology and content into Whaley, people close to the situation
said.
Through their planned investment, Alibaba and Tencent—fierce
rivals with few alliances—would be betting that smart TVs will be
the next gadget of choice for the country's consumers.
Earlier this year, Chinese cellphone maker Xiaomi Corp. unveiled
a 55-inch TV that it sells for around 4,999 yuan ($805).
Whaley TV sets, also 55 inches, will be sold starting two weeks
from now on Alibaba's Tmall website in addition to Whaley's own
website, using Alipay as the online payment channel. They will
later be available on other e-commerce platforms, said Mr. Li, a
former head of state broadcaster Shanghai Media Group, who declined
to disclose a retail price.
The combined planned investment by CMC, Alibaba and Tencent in
the startup is valued at hundreds of millions of dollars, according
to people with knowledge of the matter, with the private-equity
firm leading the charge.
CMC was set up with backing from policy lender China Development
Bank five years ago, and has investments in the China business of
large-screen theater operator IMAX Corp. and Hong Kong TV station
TVB.
Beyond providing capital, Alibaba and Tencent would also help
Whaley with content, an area in which both majors have bulked up in
the past couple of years. Alibaba has invested in online-video
company Youku Tudou and last year bought a majority stake in
Chinese film production studio ChinaVision Media Group. Tencent has
signed distribution deals with the National Basketball Association
and global entertainment producers such as Warner Music, HBO and
Sony Music.
In February, Alibaba and Tencent linked up on taxi-hailing app
Didi Kuaidi Joint Co., a product of the merger of two apps backed
separately by the Internet giants.
The CMC deal also would mark Alibaba's latest foray into
connecting the online and offline sectors. This week, the New
York-listed owner of China's biggest e-commerce platform bought a
$4.5 billion stake in electronics retailer Suning Commerce Group
Ltd., which has more than 1,600 stores.
Initially, the smart-TV sets will offer content that CMC owns
and that it gets from companies including Time Warner, Oriental
DreamWorks, STAR China, China Sports Media and Hong Kong's TVB, Mr.
Li said. Over time, Whaley plans to add more content from partners,
including the NBA, whose games Tencent shows in China.
For a decade, Mr. Li sat at the helm of Shanghai Media Group
before stepping down earlier this year to work full time at CMC.
Mr. Li, known for his avid love of poetry, started his career as a
TV news and documentary producer and has produced national hits
such as talent show "The Voice of China."
Whaley, or Wei Jing in Chinese, literally means tiny whales. The
name comes from Mr. Li's belief that his targeted customers,
teenagers and 20-somethings, individually start off small but have
dreams as big as whales. When they have their own families, a
Whaley set may be the first TV they buy, he said.
"We want to disrupt and restructure this industry," he said.
Mr. Li's strategy for Whaley is to dominate the value chain,
providing everything from content and manufacturing to
distribution. Whaley's business model involves collecting viewer
data to help determine which products and services its customers
might like, he said. The TV sets are designed by a Chinese team and
made by TPV Technology Ltd., a PC monitor and LCD TV manufacturer
with five factories in China.
Expectations for smart gadgets are sky high in China. Internet
video and TV set company Leshi Internet Information &
Technology Corp. has become the most valuable company on the
ChiNext, China's board for the growth enterprise market. Leshi,
which has a market capitalization of 94.9 billion yuan ($14.8
billion), trades at 254 times trailing-12-month earnings.
Mr. Li said he believes content providers such as CMC can be
crucial to making smart gadgets stand out. "In the future,
technology will improve and costs will keep falling," he said. "But
understanding content will always be the most important thing, and
that's what we are good at."
Juro Osawa, Rick Carew and Gillian Wong contributed to this
article.
Write to Wei Gu at wei.gu@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires