Billionaire Robin Li’s Baidu has scrapped its three-year-long bid to acquire Joyy’s Chinese live-streaming platform, YY Live, for $3.6 billion in cash, as regulators maintain a chokehold on the country’s online entertainment sector.
Moon SPV, an affiliate of Beijing-based Baidu, terminated its share purchase agreement with Joyy for its video-based entertainment business in mainland China, Baidu said Monday in a filing to the Hong Kong stock exchange. The company cited conditions such as “necessary regulatory approvals from authorities” that had not been fully satisfied by December 31, 2023, the deal’s long stop date.
In response to Baidu’s notice, Nasdaq-listed Joyy announced Monday that it is “seeking legal advice and will consider all options at its disposal.” The share purchase agreement was “substantially completed” in February 2021, according to Joyy.
First inked in November 2020, Baidu’s acquisition of YY Live was slated for the first half of 2021. Acquiring the popular live-streaming app would “catapult Baidu into a leading platform for live-streaming” and diversify the online search engine’s revenue source, said Li, cofounder and CEO of Baidu, in a statement at the time.
Baidu had paid an aggregate of $1.9 billion towards the deal, the company announced in its 2022 annual report, published last March. “Despite good faith efforts, we have not obtained necessary regulatory approvals with respect to the proposed acquisition,” the company wrote at the time.
In the field of live-streaming, Baidu would have faced steep competition from other Chinese tech giants such as billionaire Zhang Yiming’s ByteDance, which runs social media juggernaut TikTok and its domestic counterpart Douyin. Also competing is Hong Kong-listed Kuaishou, the live-streaming app backed by Tencent.
Still, moving into live-streaming may not be a priority for Baidu, which has recently been capitalizing on its longstanding bet on artificial intelligence. Often dubbed the “Google of China,” Baidu was one of China’s earliest movers in the buzzy field of AI, investing $3 billion in R&D between late 2014 and 2017 alone. Last March, Baidu unveiled AI-powered chatbot Ernie Bot, drawing comparisons with OpenAI’s ChatGPT. Baidu’s Hong Kong-listed shares rose early Tuesday before closing down 1%, faring better than the Hang Seng Tech Index, a gauge of China tech shares in Hong Kong, which slid 1.7%.
Investors remain skittish about regulatory action against online entertainment. In early December, the publication of draft legislation on new policies requiring companies to not incentivize daily logins and install content moderation led shares in Tencent and NetEase to plummet 12% and 22%, respectively. In the aftermath of the $80 billion rout, authorities appeared to walk back these restrictions by greenlighting a slew of new games.
Over the past three years, Chinese authorities have cracked down on big tech while introducing laws aimed at curbing video games and live-streaming. In November 2021, the National Press and Publication Administration announced it would require minors to limit video game usage to under 3 hours a week, among other measures. In March 2022, the National Development and Reform Commission and the Ministry of Commerce prohibited “non-state capital” from broadcasting or engaging in “live-streaming activities,” without elaborating on specifics.
