Sohu.com Inc, one of China's largest Internet firms, was alleged Sunday to be mulling the acquisition of leading domestic online video provider, PPTV, worth up to $600 million, a move analysts said would comfort Sohu as a top player in the country's promising mobile video industry.
After several negotiations, Sohu has decided to consolidate PPTV's online video operation in a deal worth between $500-600 million, China National Radio reported Sunday, citing anonymous insider sources, speculating that the official release of this move will come in the end of May.
Both Sohu and PPTV refused to comment when contacted by the Global Times.
Such speculation came after the country's search engine leader Baidu Inc on May 7 announced it had taken over streaming video service provider PPS Net TV for $370 million, which will be merged with Baidu's own online video platform iQiyi.
Sohu's capital-intensive video unit is very likely to follow Baidu's example so as to rapidly expand its user base and cut down on high content costs via the acquisition of other video providers, Yan Xiaojia, an industry analyst from Analysys International, told the Global Times Sunday.
This would be a good deal as PPTV's mobile client is very popular, said Yan, adding that domestic mobile video sector will boom in the second half of 2013.
Data from iResearch indicated as of March, about 150 million users had installed PPS clients on their mobile devices, while PPTV ranked second with some 144 million. Sohu Video's mobile client was used by less than 10 million people, languishing in 10th place.
The company will continue to devote its efforts to improving its mobile client, a PR representative with PPTV told the Global Times Sunday.
Tao Chuang, CEO of PPTV, said in an interview with sina.com Friday that overall traffic on mobile video clients was up threefold year-on-year and that this would surpass Web page visits by 2014.
Such mergers and acquisitions will increase in the online video sector and the structure of the online video industry will change, predicted Yan Huawen, an analyst with iResearch, in an April report.
But Yan from Analysys International also spoke of his concern that the consolidation will only help to quickly centralize online video watchers, but will not boost profits.
Tao remarked on his Sina Weibo account on May 7 that if an acquisition is driven by capital and does not have a good integration, it may present huge risks. He added that China's leading online video site Youku Tudou Inc had expected to increase users by simultaneously developing two brands, Youku and Tudou, but this plan has failed so far.
Youku remains in the red since taking over Tudou in March 2012. According to a first quarter financial report released Thursday, Youku Tudou suffered a net loss of 233 million yuan ($38 million) over the period.
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