China’s Xiaomi Inc., which recently became one of the world’s largest smartphone makers, will invest $ 300 million in iQiyi.com, a video-streaming platform backed by Baidu Inc., the company announced today.
The move is Xiaomi’s biggest investment to date and marks the firm’s second investment in a month in video-streaming companies, as the smartphone vendor tries to create its own content to lure the country’s more than 600 million internet users.
iQiyi and the Beijing-based Xiaomi will jointly develop content and cooperate closely in internet technology, according to today’s statement.
Xiaomi’s latest online video push follows last week’s decision to buy an undisclosed amount of stake in Youku Tudou Inc., a video site where Chinese e-commerce company Alibaba Group holds a 16.5% stake.
The iQiyi investment is led by Xiaomi and Shunwei China Internet Fund, a venture capital firm Xiaomi’s billionaire chairman Lei Jun established in 2011. Xiaomi pledged in early November that it would invest an initial $1 billion in video content to help sales of its Mi Box, a set-up television box.
Baidu, owner of China’s largest search engine, will also increase its stake in iQiyi, as the website collaborates with Hollywood studios to make films. The site is reportedly buying distribution rights of more than 1,000 U.S. movies.
“Xiaomi came to us. Baidu has been our main stakeholder for a long time and we didn’t have that much need, but we had a conversation over the last four months and decided it would be good for both sides,” Gong Yu, iQiyi’s chief executive officer, told the Hollywood Reporter.
China’s video streaming sector will “enter a new phase” after the collaboration of Baidu, iQiyi and Xiaomi, Gong said today.
But Xiaomi’s investment also faces uncertainties. Chinese regulators are curbing foreign content on video sites, as foreign shows attract more Chinese viewers. The State Administration of Press, Publication, Radio, Film and Television said in September that it must approve all foreign shows before they can be posted on the sites. The administration is also reportedly planning to impose a 30% limit on the proportion of foreign content allowed on those sites.
Still, the iQiyi investment gives Xiaomi a stronger footing in China’s video-streaming market, with revenues hitting 6.82 billion yuan in the July-September period, up 83.2% from a year earlier, according to internet consultancy iResearch.
Lei Jun, who ranked No.8 on the Forbes China Rich List with a net worth of $ 9.1 billion, is also talking to investors for a funding round that would value the private tech firm at about $ 40 to $ 50 billion.
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