Baidu’s iQiyi video service raises $1.53 billion

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Baidu is charging up its video content push after iQiyi, its YouTube-style service in China, raised $1.53 billion from the sale of convertible notes to investors. The deal appears to end speculation that the firm was mulling an IPO.

iQiyi, which had an offer to go independent fall through last year, raised the capital from a number of top-name investors including Hillhouse Capital, Boyu Capital, Run Liang Tai Fund, IDG Capital, Everbright-IDG Industrial Fund and Sequoia Capital. Baidu itself invested $300 million into the service, too.

Baidu CEO Robin Li and iQiyi CEO Yu Gong led a deal to spin iQiyi out into its own business last year, however it failed to progress and collapsed in July. Nonetheless, speculation over its future and funding options persisted throughout 2016. In December, Baidu denied reports of a potential iQiyi IPO in the U.S. or Hong Kong. It seems that this capital raise was the strategy it finally decided upon to take its business to the next level.

A spokesperson at Baidu told TechCrunch that the capital raised would likely be spent on acquiring content. iQiyi said in an announcement that it would also be spent on upgrading its IP ecosystem for seeking out illegal content. There’s been a major push towards subscription-based video content in China so it makes sense that iQiyi is building up a war chest so it acquire overseas and national programming to stand out from a crowded field of well-funded rivals.

iQiyi claims 481 million users and 5.579 billion hours of time spent on its service each month. The service is engaged in a dogfight with Alibaba-owned Youku Tudou, acquired via a $3.5 billion deal in 2015, and services from Sohu and Tencent. That fierce competition is one reason Netflix gave up its long-time ambition to launch in China. Regulation is another factor — it is thought to be behind Netflix rival Mubi’s decision to abandon a China launch and the abrupt removal of Apple’s iBooks and iTunes Movies services in the country just six months after launch.