Alibaba starts entertainment funding platform

Alibaba Group announced Wednesday the launch of a new investment platform Yu'lebao (entertainment treasure) on its Taobao mobile phone application, according to an announcement sent to the Global Times Wednesday by Alibaba.

Users can invest in entertainment programs through the Yu'lebao platform and the minimum investment is 100 yuan ($16).

The first round investment project is an insurance assets management product provided by Shanghai-based Guohua Life Insurance Co, and it will bring a 7 percent expected annualized return to investors, said the announcement.

There are four movies and an online game in the first round project from which investors can choose. Through the Taobao app on their mobile phones, users can buy the insurance assets management product by choosing to invest in a certain movie or game.

The total funding goal of the first round project is 73 million yuan, the announcement said, noting each investor can invest at most 200 yuan for each movie and 100 yuan for the game.

Alibaba also noted in the announcement that the investment platform is not crowdfunding because crowdfunding cannot provide equity or capital to investors as return, which is different from Yu'lebao.

Alibaba avoided the risks of crowdfunding by selling an insurance product rather than seeking financing directly, Zhao Zhanling, a legal counsel with the Internet Society of China, told the Global Times Wednesday.

There is still a lack of official supervision for crowdfunding in China, Zhao said.

"The online advertisement of Yu'lebao makes it look like a crowdfunding program," Zhao said, noting it is only a marketing skill to attract investors by stressing investment in films.

Alibaba must inform investors of the nature of Yu'lebao as well as the risks, according to Zhao.

Yu'lebao does not guarantee the invested capital or the return, according to the introduction on Yu'lebao's Web page.

Insurance asset management products contain risks and investors should notice that, Zeng Linghua, chief analyst at Shanghai-based fund consultancy Howbuy, told the Global Times Wednesday.

The investment limit set on Yu'lebao might be a measure to control the investment risk for investors, media reports said.

Yu'lebao is not Alibaba's first foray into the entertainment industry, Zhu Wei, an analyst at Beijing-based entertainment industry consultancy Entgroup International Consulting, told the Global Times Wednesday.

In 2009, Jack Ma Yun, the former CEO and current chairman of Alibaba, invested in leading Chinese entertainment company Huayi Brothers Media Corp and became the third largest shareholder of Huayi, Zhu said.

Yu'lebao gives fans a chance to be involved in the works of stars that they like, Zhu said.

Besides the annualized return, investors also have the opportunity to receive presents such as invitations to fan meetings, according to Alibaba's announcement.

But films facing capital shortages usually do not have stars cast so it will still be hard for these films to attract investment from general audiences, Zhu said.

Due to the risks contained in Yu'lebao and the high cost of film production, Yu'lebao may not have much influence on the entertainment industry, according to Zhu.

Over 47,000 users had invested in Yu'lebao by 12 pm on Wednesday.