China-based e-commerce company Alibaba has launched a crowdfunding entertainment subsidiary called Yu Le Bao that will invest in media content and allow micro-investors the chance to influence the end product.
Yu Le Bao, which translates to entertainment treasure in English, allows customers to invest sums starting at RMB 100.00 ($16.10) for films and RMB 50.00 ($8.05) for games, through to an upper limit of RMB 1,000 ($161), through their smartphones.
The money raised through Yu Le Bao will be channelled to China-based insurance company Guohua Life, which will reinvest it in the projects. Because the investments will be grouped together, customers will all receive the same 7% return.
The fund has initially lined up three films and one social networking game, which jointly aim to raise RMB 73m ($11.8m). Investors will also get the chance to meet the stars and even have a say in who is cast in the resulting films or television programmes.
However, the launch of Yu Le Bao could hasten a confrontation with China’s banks, which are already concerned over Alibaba initiating Yu’e Bao, an online service launched in June 2013 that allows customers to invest with no upper limit, and which offers an annual return of 6%, significantly more than the 3.3% offered by banks. Yu’e Bao has already racked up RMB 500bn ($80.5 billion) of assets under management, and rivals such as Tencent and Baidu are following suit by launching their own high-interest services.
This has led to concern over both interest rate liberalisation and potential security issues. China’s banks have responded by laying down limits on how much money customers can transfer to online investment platforms, and the government is reportedly also considering introducing increased regulation, though it is currently unclear how this would affect Alibaba’s financial services offerings.