Under a three-year agreement with Warner Bros, Youku will add between 400 to 450 Warner Bros. movies to its Youku Premium library.

"People are increasingly willing to pay for high quality content, and we take the growth of Youku Premium as a sign that the market is improving for paid services," Dele Liu, Youku's chief financial officer, said in a statement.

Youku Premium, which was officially launched on Tuesday, had began beta testing in October 2010 and since then, the service has processed 200,000 paid transactions for its library of more than 300 movies and 3,880 educational programs.

Earlier this month, Warner Bros. said it will distribute on-demand movies in China starting this summer, through an agreement with China's YOU On Demand Holdings Inc.

Foreign movies are available in cinemas through a quota system that limits the number of foreign movies screened in China each year. Otherwise, foreign movies are widely accessible to the public on pirated DVDs that can be bought on the black market for less than a dollar.

The problem of rampant piracy has robbed Hollywood studios and music production companies of millions in profit in the world's most populous country.

Copyright Reuters, 2011