Yanhua is headed by Mr. Cao Qiang, who is known in the industry as the "John Malone of China." Before starting Yanhua, Mr. Qiang was the CEO of WASU Media Group ("WASU"), China's leading cable TV network, based in Hangzhou, Zhejiang Province. Amongst many accomplishments under his tenure at WASU, he successfully secured Alibaba as a 20% shareholder and strategic partner, in WASU.
The Yanhua Partnership will modify and improve Wecast's legacy major studio paid content business model by moving from a framework that included high and fixed cost upfront minimum guarantee payments, rising content costs from major Hollywood studios and low margins to a structure that will now include relatively nominal costs to Wecast, upfront minimum guarantee payments to Wecast and the opportunity to reach an even wider audience. With this partnership, Yanhua will assume all sales and marketing costs and will pay Wecast a minimum guarantee in exchange for a percentage of the total revenue share. This will completely transform the legacy business by mitigating or removing the possibility of continuing to operate at a loss yet still providing Wecast with the opportunity to benefit from revenue upside based on the Yanhua Partnership's success.
It is important to note and distinguish between the legacy Hollywood studio paid content business (that Yanhua will now be operating) and Wecast's new Paid Content Group vertical that is vertical #1 of the four-part vertical plan articulated by Mr. Wu and Wecast on several occasions. The legacy Hollywood studio paid content business is a strictly China-distributed, high-cost, content resell business. With the new Paid Content Group vertical, Wecast is building a direct-to-consumer (and therefore lower cost) cloud-based platform that will have over 100,000 titles from independent producers and be able to reach a global and much wider audience and customer base. Most importantly, the new Paid Content Group is being established with an operational and cost framework of controlled and stronger profitability margins, underpinning it.
As Chairman Bruno Wu discussed on the WCST Q3 Earnings Conference Call, the legacy major studio paid content and video on demand business in China can be considered both complex and challenging for several reasons. The market is crowded by well-capitalized and diversified competitors who use their deep coffers to promote and sell their services and do so using a loss leader strategy. While pay content and video on demand offerings are not profitable (specifically with expensive Hollywood content), many continue to pursue this strategy because the practice attracts an enormous amount of eyeballs and can be used to capture new customers who can then be introduced and sold on, other service verticals that operate with much higher profit margins.
With the immense draw that exists and will always exist for content, the legacy paid content business is still a crucial component in Wecast's total business. But Wecast Network's strategy shift and future will be that of a global-reaching ecosystem centered on content consumer media and creating a value chain of Branding, Content, Commerce and Licensing all intertwined and run in an aggregated, synergetic and interwoven manner on one platform. By passing along the high cost burden that major studio-based paid content has presented the Company with up until this point, Wecast will be able to more deeply focus on its new strategy and verticals, and at the same time leverage this new Yanhua Partnership to reach a larger swath of the population with whom Wecast can target with its other service verticals.
About Wecast Network, Inc. (http://corporate.yod.com)
Wecast Network, Inc. (NASDAQ: WCST) is leveraging and optimizing its current operations as a premium content Video On Demand service provider in China to evolve into a global, vertical, ubiquitous and transactional B2B2C, mobile-driven, consumer management platform for both enterprises and consumers. By aiming to establish the world's premier multimedia, social networking and smart e-commerce-enabled network with the largest global effective connected user base, Wecast, through this expanded, cloud-based, ecosystem of connected screens combined with strong partnerships with leading global providers, will be capable of delivering a vast array of WCST/YOD–branded products and services to enterprise customers and end-use consumers - anytime and anywhere, across multiple platforms and devices.
Wecast has content distribution agreements in place with many of Hollywood's top studios including Disney Media Distribution, Paramount Pictures, NBC Universal and Twentieth Century Fox Television Distribution, Miramax, as well as a broad selection of the best content from Chinese filmmakers. In addition, the Company has governmental partnerships and licenses as well as numerous JV partnerships and strategic cooperation agreements with an array of distribution and content partners in the global new media space. Wecast is headquartered in both New York, NY and Beijing, China.
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Director Strategy & IR
Wecast Network, Inc.
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SOURCE Wecast Network, Inc.