Shanghai-based video streaming platform PPStream has reportedly (link via Google Translate) been purchased by iQiyi, the online video unit of Internet search giant Baidu, for around $350 million to $400 million. A Baidu spokesman would not confirm the reports, which have been circulating in Chinese media since the end of last month, but a statement by the head of rival video platform Youku-Tudou seems to confirm that a deal has indeed been struck:
“After the success and synergy created by the Youku Tudou merger, increasing consolidation was inevitable throughout the video industry. We are happy to see this purchase go forward, we expect this acquisition will further rationalize the industry and help reduce piracy in the sector,” said Youku-Tudou president Dele Liu in an email.
iQiyi launched in 2010 under the auspices of Baidu and from the beginning has focused on legally distributed, professionally produced media and entertainment content, which has led to the site being referred to as “China’s Hulu” (in fact, former investor Providence Equity Partner was also an investor in Hulu until exiting from the U.S. site in October).
Tudou previously offered mostly user-generated content, but after being purchased for $1 billion by Youku, the combined company has focused on signing content partnership deals. The drive toward legal content was prompted in part by last year’s crackdown on “inappropriate” material by the Chinese government.
Baidu bought out Providence’s controlling stake in iQiyi last November for an undisclosed amount. The timing of the deal seemed to suggest that Baidu made the purchase in response to Youku and Tudou’s August merger. At the time, Baidu chairman and CEO Robin Li said that Baidu planned to integrate iQiyi’s content into Baidu’s overall search and mobile services.
“Online video is a key strategic vertical for Baidu as user numbers and time-spend continue to increase expontentially, underscoring the tremendous potential in the sector,” said Li.
Acquiring PPStream would help boost iQiyi’s market share, which lags behind Youku-Tudou, China’s biggest video site. According to estimates by Analysys International, Youku-Tudou holds about 32.4 percent of China’s online video market, while its nearest competitor Sohu.com has 10.9 percent. iQiyi held just 6.7 percent of the market. The deal is also potentially a lifeline for PPStream, which has struggled to make a dent in China’s highly competitive online video industry.