Apple (NASDAQ: AAPL ) has done the impossible: It has become a major success in
China. The technology companys iPhone and iPad are hits in the country where
Microsoft (NASDAQ: MSFT ) and so many others have failed. Most impressive is how
Apple has found success while not falling prey to the widespread piracy and
bootlegging that takes place in China. Does its success presage a new era of
prosperity for American companies looking for riches among a still-growing
consumer class abroad? Is this the moment that electronics and entertainment
companies industries mixing more than ever thanks to Apple find legitimate
revenue streams in China? Anythings possible. If any product is bootlegged more
than consumer technology like smartphones in China, its the media consumed on
those devices. Now companies seem to be emboldened, hoping to turn a buck
through new opportunities in the country. DreamWorks (NASDAQ: DWA ), the
animation studio and distributor behind movies like Shrek , has partnered with
Youku (NYSE: YOKU ) to distribute the Kung Fu Panda movies through its online
portals. This will be the first time DreamWorks movies will be available in the
country online. At least, that is, legally. Before Youku became one of 2010s
most-hyped IPOs, the Chinese YouTube was notorious among entertainment and
technology companies. Unlike Google s (NASDAQ: GOOG ) heavily monitored online
video website, Youku was barely policed and was a haven for pirated movies,
music and television shows. In the past year, however, the site has signed deals
with a number of content providers, including Disney s (NYSE: DIS ) ABC. Time
Warner (NYSE: TWX ) signed a similar deal to DreamWorks shortly after Youku went
public in the U.S., offering limited-time pay-per-view viewing options of movies
like 2010s Inception . Warner Bros. kicked off a far more ambitious partnership
with Youku in June. While DreamWorks is testing the waters with one of its
family-friendly franchises, Warner Bros. opened an on-demand store with nearly
500 movies available, including recent hits like the Harry Potter series, as
well as classic films. The partnership is more than an experiment; Warner Bros.
contract with Youku wont expire until 2014. Will Americas entertainment
businesses replicate Apples success in China? These partnerships with Youku are
a start. Entertainment companies across a number of media are winning key
battles in the war against piracy in China. The countrys search engine and media
empire Baidu (NASDAQ: BIDU ) recently signed agreements to pay licensing fees to
record labels, book publishers and others after years of acting as a major
piracy outlet online. These new legitimate outlets are still new, though, and
time will tell if Chinese citizens will pay for movies, music and other wares or
if a new pirate bay will open to replace the old. For investors interested in
Youku and its long-term potential , these partnerships are good news, too.
Shares were trading above $25 after the announcement, climbing back up after a
dismal August that saw the stock hit an all-time low of $19. Youku has strong
entertainment partners in the West and a lock on video entertainment through
Chinese citizens smartphones, tablets and PCs. Those factors surely put Youku on
stronger footing, but they dont change the fact Youku still has been reporting
significant losses every quarter. Those losses are shrinking the company saw a
net loss of more than $4 million in the second quarter of 2011 compared to
nearly $10 million during the same period last year but not enough. As of this
writing, Anthony John Agnello did not own a position in any of the stocks named
here. Follow him on Twitter at
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