Baidu Reacquires YY Live to Strengthen Its Position in the Digital Video Market

Baidu $9888.HK, one of the leading Chinese internet giants, has announced its acquisition of JOYY $YY, a company specializing in live streaming. The deal is valued at $2.1 billion and marks the revival of an agreement that fell through a year ago. This development reflects Baidu's ambition to solidify its standing in the rapidly evolving digital video market.

Revisiting the Deal

Initially, the companies agreed on the acquisition of YY Live back in 2020 for $3.6 billion, during a period when the demand for streaming services peaked due to the pandemic. However, the lack of necessary regulatory approvals led to the deal's collapse in January 2021.

Now, with a softened regulatory environment in Beijing, Baidu has successfully completed the acquisition.

Reason Behind the Changes

Baidu has not provided a detailed explanation for the cancellation of the previous deal. Nevertheless, since the deal’s collapse, both companies have engaged in active negotiations to forge a new agreement. As a result:

1. In February 2021, JOYY received approximately $1.86 billion as part of the initial agreement.

2. This week, an additional $240 million was finalized, closing the deal.

Impact on Baidu and the Digital Video Market

The acquisition of YY Live allows Baidu to diversify its revenue streams and compete with major players like Douyin and ByteDance, the owner of TikTok. These companies have established themselves as leaders in the online entertainment sector. Baidu is optimistic that this strategic move will enhance its market position.

Other key aspects of the deal include:

1. US-listed Baidu shares increased by 1% in pre-market trading.

2. JOYY shares jumped by 6%.

Competition in the Market

Baidu's main subsidiary in the online video sector, iQIYI $IQ, listed in the US, is often considered China’s answer to Netflix. However, strong competition from giants such as Tencent $0700.HK and Youku $9988.HKfrom Alibaba has hindered iQIYI’s growth in recent years, resulting in a nearly 60% decline in its stock value last year.

Advantages and Challenges for Baidu

The acquisition of YY Live offers Baidu several advantages:

1. Revenue diversification,

2. Strengthened presence in online entertainment,

3. Reduced dependence on traditional search services.

However, Baidu will also face several challenges:

1. Integration of new assets and business optimization,

2. Continued competition for market leadership in the crowded digital content space.

Conclusion

The completion of the deal between Baidu and JOYY represents a significant step for both companies and signifies Baidu's re-engagement in the digital video market. While challenges lie ahead, the successful integration of YY Live could exceptionally bolster Baidu’s position in the online entertainment field. This move may become a pivotal point in the company’s strategy for the coming years and shift market dynamics in favor of the larger players