Video streaming giant iQiyi said to be mulling IPO in the US

A flotation of China’s leading video streaming platform, a subsidiary of internet search giant Baidu, could value the company at as much as US$10 billion

PUBLISHED : Tuesday, 26 September, 2017, 5:25pm
UPDATED : Tuesday, 26 September, 2017, 10:50pm

China’s leading video streaming platform iQiyi, a subsidiary of internet search giant Baidu, is said to be mulling an initial public offering (IPO) in the US that could value the company at as much as US$10 billion.

The Netflix-like video streaming giant is meeting potential underwriters with a view to a 2018 listing, according to Bloomberg, citing sources close to the matter.

Speculation has been growing for months that iQiyi was seeking an IPO in either Hong Kong or the US.

Both Baidu and iQiyi declined to comment on the potential IPO plan.

The acclaimed video streaming platform raised US$1.5 billion in February with the issue of convertible notes to a group of investors including Baidu, which has held a majority stake in the company since 2012, as part of a concerted push into the country’s booming entertainment market.

“Video streaming businesses in China are cash-burning, as bandwidth costs and content licensing fees rise each year,” said Xiong Hui, an analyst with independent research firm iResearch, adding that competition plays a major part, too, forcing platforms to provide not only a larger pool of movies and TV content, but also high-quality ones, as good as 1080p or even Blu-ray.

Video streaming giant iQiyi raises US$1.5b in convertible notes issue

To gain an upper hand on the competition with Alibaba-controlled Youku Tudou and Tencent Holdings’ Tencent Video, iQiyi joined hands with Netflix in an exclusive licensing deal in April.

The agreement covers a wide range of Netflix’s programmes, including original TV series, animation and documentaries.

“Production of original content is expected to set the front-runners apart from the also-rans in the longer term, and money is the key,” said Xiong.

Customer retention is not high for video streaming sites which means users flock to wherever they can find the best resources. Self-produced content, on the other hand, can rope in more paid subscribers to generate stable income, the analyst said.

Netflix extends its global reach to China – but not on its own terms

iQiyi’s app was on 610 million mobile devices in July, second only to the most popular, WeChat, in China, according to iResearch. The country’s online video market was valued at US$8.83 billion in 2016.

Despite all wishing to become a Chinese version of Netflix, the path may not be easy, Xiong pointed out.

Netflix is a leading player globally and is good at localisation with joint productions targeting markets such as Japan, Taiwan and the UK, whereas the home market remains the major focus for Chinese sites,” he said.

Additional reporting by Laura He