Baidu Video Sale Hints at a China Tech Plot Twist

In what looks like a plot twist, Baidu Inc. is reportedly selling a majority stake in iQiyi Inc. for $7 billion. The deal is likely to spark interest from state-owned companies and financial sponsors. iQiyi is currently the second largest video streaming service in China, with almost 100 million paying subscribers. Baidu currently owns 53% of the company. Both companies are traded as ADRs on the NASDAQ.

While the iQIYI deal was a blow to the company’s bottom line, the announcement does indicate the company is not going to be targeted by the government’s crackdown on technology companies. The iQIYI unit dragged down Baidu’s sales, with paying members falling 4% in March. Baidu CEO Robin Li likely prefers more lucrative ventures, and the video business may impede his ability to move forward with other parts of the company.

It’s rumored that Baidu will sell a stake in iQIYI, a subsidiary valued at $7 billion. The deal is subject to change and no further details are available. A spokesman for Baidu declined to comment. Other interested parties include state-owned firms and financial sponsors. A Hong Kong private equity firm is also reportedly interested in purchasing the stake in iQIYI.

Another way in which Baidu may diversify its business is through its own car-building efforts. The company’s Apollo division is closest to the automobile industry and has begun collaboration with automakers, including Toyota, Ford, and Volkswagen. It may also create a majority-owned venture with a local automaker. But the question remains: What does this mean for Baidu’s long-term future? The Chinese internet giant is not the only company working to develop self-driving tech.