Wedding videos don’t always turn out the way their makers intended (all that shaky camerawork). Youku and Tudou, China’s two biggest online video websites, may have higher hopes for their own marriage. Their merger agreement yesterday will see the two companies combine in a $4.5bn, all-share transaction to compete better in the world’s biggest internet market. It is a defensive move: growth in China’s online video market may well have peaked.

Youku and Tudou are a bit like online television stations, providing users with professionally produced film and television content. That makes them different from YouTube, which relies on user-generated content. But it means that even though the combined revenues of the two companies doubled to Rmb1.5bn ($232m) last year, they remain lossmaking: growth in content costs, in particular, outpaces sales. They clearly hope that by joining forces they can remove the competition that has been driving up content costs. The merger will also avoid a potentially costly legal battle (each has accused the other of breaching copyright).

The trouble is that the logic of the merger requires a large overlap in content that does not exist. Apart from some popular programmes, the content on each site is still different. That will make it harder to wring synergies from the Rmb410m in content costs at the merged company. And even though they are forecast to eke out a net profit in 2013, losses for 2011 of Rmb680m at the merged company are four times greater than Youku’s loss that year. Revenue growth is also set to slow: online video advertising is expected to grow an average 50 per cent over the next three years, three times slower than over the last three. As pure online video sites, they face competition from state media and web portals such as Sohu and Baidu, which are strengthening their video services.