Baidu has canceled its $3.6 billion acquisition of JOYY Inc.'s China live-streaming subsidiary, YY Live, according to a Hong Kong stock market filing on Monday, a major blow for the Chinese tech giant's plans to participate in the online entertainment market and diversify its revenue sources.
Moon SPV Ltd., a Baidu subsidiary, aimed to purchase JOYY's live-streaming video-based entertainment company in 2020. However, according to Baidu's statement, by the end of 2023, certain of the terms of the share purchase agreement, like getting the required regulatory approvals, had yet to be entirely met, according to a report from Reuters.
Reports from 2021 predicted that China's antitrust bureau would reject the agreement, reflecting Beijing's desire to regulate big data and monopolies. With 277 million monthly active members, the Chinese social live-streaming network JOYY is a notable online entertainment player.
An employee walks past the company logo at Baidu's headquarters in Beijing on September 6, 2022.
A Major Blow to The Chinese Tech Juggernaut
The deal's collapse presents a significant obstacle to Baidu's ambitions to overtake market leaders in the very competitive online entertainment space, such as ByteDance Ltd, per Bloomberg. During the first nine months of 2023, JOYY, a pioneer in Chinese live-streaming, attracted 1.61 million paying subscribers worldwide and brought in $236 million in income from China.
China's regulatory climate, marked by heightened scrutiny and measures to curb excessive power consolidation, has caused major tech transactions to falter. Given worries about data control and monopolistic activities, Baidu's misstep with JOYY fits with a larger trend of regulatory caution when approving huge purchases.
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In recent years, the Chinese government has tightened regulations on the tech industry, signaling a reassessment of its stance to stimulate economic growth. However, Beijing remains cautious, with regulatory bodies unlikely to greenlight deals that conflict with broader policy objectives, such as curbing gaming addiction and implementing controls on online entertainment.
Baidu's Ernie Bot Hits Milestone
The news comes days after Baidu announced a significant milestone, reporting that its Ernie bot, an artificial intelligence product similar to OpenAI's ChatGPT, has surpassed 100 million users, as per a report from CNBC. The AI chatbot, available in both Chinese and English, received regulatory approval for mass rollout in August, reflecting Baidu's success in the AI space, despite challenges in its diversification efforts.
This picture illustration shows Ernie Bot of China's Baidu in Beijing on August 31, 2023.
Tencent and Alibaba primarily focus on AI for business partners but provide public AI chatbot services in China. Tencent's chatbot is integrated into the widely used WeChat app.
In November, Baidu began charging $8 monthly for its advanced Ernie bot, while ChatGPT charges $20 monthly for its latest model.
The firm did not say if the 100 million Ernie bot users were active or if they were active from a certain time. In November, Microsoft-backed OpenAI estimated 100 million monthly ChatGPT users.
Baidu shares closed 3% higher in US trading following the announcement, maintaining a modest uptrend for 2023.
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