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Inside iQiyi’s Indian Movie Deal

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iQiyi licenses Indian films from Eros

iQiyi (IQ) recently struck a deal to license Indian movies to broadcast to its audience in China. It’s licensing the content from Eros International. The deal with Eros mirrors a similar content-licensing agreement iQiyi struck with Netflix (NFLX) last year.

Content-licensing deals such as those iQiyi has struck with Eros and Netflix are a great way for it to expand and enrich its content menu as it pursues the billions of dollars in revenue in China’s online video market.

The proportion of Chinese Internet users paying for online video content increased more than ten times in four years to hit 13.2% in 2016, according to iResearch. By 2022, it’s expected that 40% of Chinese Internet users will be paying for online videos.

$11.5 billion online video subscription market

With the number of Chinese users paying for online videos increasing, the country’s subscription video on-demand market will triple in five years to hit $11.5 billion by 2022, iResearch predicts.

iQiyi is in a race with Tencent (TCEHY), Alibaba (BABA), and other providers for a revenue opportunity in China’s online video market. Tencent’s Video segment’s revenue rose 16% YoY (year-over-year) to ~$700 million in the second quarter. Alibaba’s digital media and entertainment revenue, which includes sales from its Youku Tudou video service, rose 49% YoY to $900 million in the quarter.

iQiyi’s revenue rose 51% YoY to $932.5 million in the second quarter.

Building a differentiated video service

Adding content from production powerhouses such as Eros and Netflix could help iQiyi build an outstanding video service in China to fuel its growth in the country. Netflix spends billions of dollars on high-quality productions every year.

iQiyi is backed by Baidu (BIDU), which maintains over 93% voting power in the company. Revenue rose 32% YoY at Baidu in the second quarter.

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