China’s online video wars are heating up again. Last year, Alibaba snapped up Youku Tudou, the country’s largest YouTube-like video portal, in a major $3.5 billion deal, and now there’s more happenings in the space after Baidu received an offer to sell its majority share in close rival Qiyi.
Baidu, best known for its search technology and investment in Uber, owns 80.5 percent of Qiyi, and on Friday it disclosed that it received a bid for that stake that values the video content service at around $2.8 billion. The offer is led by Baidu chairman Robin Li and Qiyi CEO Yu Gong, and, if successful, it could lessen Baidu’s financial responsibility to the business and provide new funding options by taking Qiyi public.
In a filing made at the end of its most recent financial year, Baidu disclosed that Qiyi — which is a subsidiary that is included in its financial results — was the primary reason for its content costs ballooning 125 percent to $301.7 million,and bandwidth expenditure rising 81 percent year-on-year.
In a comment to Bloomberg, Summit Research Partners analyst Henry Guo suggested that a China IPO, not a U.S. listing like Baidu, could be on the cards for Qiyi if it is allowed to go private via this acquisition offer.
“If you IPO in China, because of the brand awareness, you may get a really high premium. In China, people don’t care whether or not you’re profitable yet,” Guo said.
Research last year suggested that there’s little to separate Youku and iQiyi (Tudou remains a separate site to Youku) as the largest video platforms in China, but with Alibaba now in control of both Youku and Tudou, Qiyi and Baidu are making moves of their own.
This bid for Qiyi follows another significant China-led deal this month. A consortium led by Baidu rival Qihoo 360 and Kunlun Tech, the majority owner of gay dating app Grindr, offered to buy browser maker Opera for $1.2 billion last week.