Chinese social media and entertainment giant Tencent may be eyeing a move to take over rival video streaming firm iQIYI. A combination of the two would a create streaming platform comparable in scale to Netflix.
The Reuters news agency on Tuesday cited two unnamed sources said to be familiar with the matter. They said plans are at an early stage and that Tencent may not yet have approached iQIYI.
The sources said a merger “would lower costs and counter competition in a sector boosted by stay-at-home virus policies.”
Streaming video has enjoyed huge growth in China over the past five years, since smart phones became the norm in the Middle Kingdom. It has also benefited from the financial arms of Tencent and Alibaba making online and mobile payments ridiculously easy in every walk of Chinese life.
Tencent Video recently reported 112 million paying subscribers at the end of March, while iQIYI, which is NASDAQ listed and majority-owned by Baidu, claimed 119 million monthly subscribers. Third-ranked generalist streaming platform Youku, which is backed by Alibaba, does not disclose its figures separately, but is estimated to have 90-100 million subscribers. For comparison, Netflix reported 182 million subscribers worldwide at the end of March, of which 69 million were in the U.S. and Canada.
All three of the Chinese platforms are losing vast sums of money. They are spending heavily on bandwidth and servers, but more importantly acquired and original content, which they use to attract and