Baidu ups video share, buying PPS Net TV

Baidu, the largest Internet search engine in China, has taken over streaming video service provider PPS Net TV for up to $400 million, media reported on Thursday.

It is another blockbuster deal in China's video streaming segment after Youku acquired Tudou last year.

The Internet search engine spent $350 to 400 million for this acquisition, the China Business News reported Thursday, citing people with knowledge of the matter.

A Baidu spokesperson declined to comment on the deal, and PPS was not immediately available for comment.

The deal enables Baidu to challenge online video leader Youku, which bought smaller rival Tudou Holdings Ltd for over $1 billion last year, the newspaper reported.

The consolidation will help generate synergies between PPS and Baidu's online video portal iQiyi, Pang Yiming, an Internet analyst at Beijing-based consulting firm Analysys International, told the Global Times Thursday.

Advertisement accounts for the majority of business revenues for both PPS and iqiyi.com. But their business models are slightly different. PPS is personal computer-based while iQiyi is Web-based, so their businesses are complementary to each other, Pang said.

However, the takeover will not affect competitors' current market rankings in the short term, she said.

Youku is currently the largest online video streaming service provider with a 30.2 percent market share after taking over Tudou, followed by Sohu's video unit with 10.3 percent, iQiyi with 9.7 percent and PPS with 7.1 percent as of the end of 2012, according to statistics from Analysys.

"PPS - known for pirated copies of videos - will benefit from merging with iQiyi … in terms of video content sharing so as to lower its cost," said Li Yan, an Internet analyst with Snowball Finance, a Bejing-based online financial service firm for overseas-listed Chinese stocks.

Yet the short-term overall impact of the deal on Baidu Inc, a NASDAQ-listed corporation with market value of over $30 billion, is very limited, Li said.

Also, the deal will help create a better quality of service for users, Li said. She noted that market concentration will lead to a more regulated market as opposed to the current chaotic competition.

PPS will increase its number of users by joining up with Baidu, which can promote its newly acquired division through its search engine, Chen Wei, a PPS user, told the Global Times Thursday.

Chen expressed concerns that a more consolidated market might not be good for users, who will have no options if the large service providers decide to charge fees for online videos, many of which are currently free.