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Baidu buys control of streaming video portal iQiyi, raises stakes in China's media wars

The merger of China's video giants Youku and Tudou this August must have struck a nerve over at Baidu: the search engine just bought out equity firm Providence's controlling stake in iQiyi, an already large video service built solely around streaming professional movies and TV shows. Should the deal wrap up as planned in the fall, Baidu plans to keep its new partner as a separate badge but weave its content throughout mobile sites and search results. The company is unsurprisingly taking a Google-like strategy to make sure it isn't left on the sidelines as searchers go elsewhere for video. Pragmatism aside, its deal could represent more for China as a whole -- when hundreds of millions of people are exposed to commercially-oriented video as a matter of course, it could tip the balance in a way that we didn't see with YouTube rentals.

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Baidu Announces Acquisition of Providence Equity Partners' Stake in iQiyi

BEIJING, Nov. 2, 2012 /PRNewswire/ -- Baidu Inc. (NASDAQ: BIDU), the leading Chinese language Internet search provider, today announced that it has reached a definitive agreement with Providence Equity Partners ("Providence") pursuant to which Baidu will purchase shares of iQiyi.com ("iQiyi") held by Providence for an undisclosed amount. Upon completion, Baidu will have a substantial majority stake in iQiyi.

iQiyi, launched in April 2010 and known as "Qiyi" until November 2011, is the first online video platform in China to focus exclusively on fully licensed, high-definition and professionally-produced content. In August 2012, iQiyi was ranked as the number one online video platform in China in terms of average time spent per user and number two in terms of total monthly time spent, according to iResearch, a China-based research firm.

Baidu and Providence expect the transaction to close in the fourth quarter of 2012, subject to customary closing conditions. Upon completion of the transaction, iQiyi will be consolidated into Baidu's financial statements. iQiyi will continue to operate as a separate brand with its existing management team.

"Online video is a key strategic vertical for Baidu as user numbers and time-spend continue to increase exponentially, underscoring the tremendous potential in the sector," said Robin Li, chairman and CEO of Baidu. "We are very pleased with the progress iQiyi has made and have confidence that iQiyi's management will continue to grow its leading position. Going forward, we see users spending more and more time on online video and we will integrate iQiyi's content more seamlessly into Baidu's overall search and mobile services."

Mr. Li added, "I want to extend my appreciation to the Providence team for their contribution to and support of iQiyi over the last two-and-a-half years."

Dr. Yu Gong, founder and CEO of iQiyi, added, "iQiyi has established a great business foundation and strong brand recognition and we look forward to leveraging our relationship with Baidu to further drive superior user and advertising customer experience."