Owing to growing demand for streaming content among Chinese consumers, Chinese (MCHI) tech giant Baidu (BIDU) is set to debut its online video service, iQiyi, with an IPO (initial public offering) in the United States.
Baidu is initially seeking to raise $1.5 billion through the iQiyi IPO, which is expected to list on the NASDAQ under the ticker IQ. Baidu will have control of iQiyi even after the IPO.
In China, iQiyi is the leading subscription-based online video service, according to eMarketer. It served 69.9% of China’s online video subscribers in 2017. In comparison, Tencent video served ~63% of subscribers, whereas Alibaba’s (BABA) Youku Tudou served 50.3% of video users.
Netflix’s deal with iQiyi
US streaming giant Netflix (NFLX) has a licensing agreement with iQiyi, signed in April 2017, that will allow Netflix to penetrate the Chinese markets. Through this deal, iQiyi wants Chinese subscribers to gain access to Netflix’s popular series such as Black Mirror, Stranger Things, and Mindhunter. iQiyi’s debut in the United States should support the Netflix deal and help the company expand its presence in Chinese markets, which have been untapped for years due to strict regulations in China.
China imposes strict regulations on foreign companies. As a result, Netflix could face censorship issues for its original shows in China. The Chinese government has censored the popular series Game of Thrones and postponed the launch of the third season of Netflix’s original political thriller House of Cards in the past.
In the past, the Walt Disney Company (DIS) tried to bring its over-the-top content services to China via a partnership with Alibaba, but the service was suspended in 2016 due to regulatory issues. Chinese regulators also suspended Apple’s online book and movie service in the country.