Sohu, Tencent and Baidu unit to form video alliance

Agreement will see three companies share their existing content libraries, and hopes to "burst the bubble" of overpriced content in Chinese video market, report states.
Written by Ellyne Phneah, Contributor

Tencent Holdings, Sohu.com and Baidu's iQiyi.com unit will form an alliance to offer online video services in China, to help manage costs and follows the announced merger between country's two largest video streaming sites YouKu and Tudou.

The agreement will see the three companies, previously rivals in the Internet video consumers, bringing their combined purchasing power to bear in joint acquisitions of "superior" domestic and imported video content, China Daily reported on Wednesday. They will also share their existing content libraries and provide other mutual support.

"Sohu, Tencent and Baidu are all iconic Internet giants in China. We will integrate our capabilities in online video, portals, search engines and social networks to better service online video consumers," Deng Ye, CEO of Sohu Video and vice president of Sohu.com said. The combination could make Video Content Cooperation (VCC) the most powerful communication and marketing platform in China's online video history, she added.

Vice-president of Tencent, Liu Chunning also said he hopes the alliance will "burst the bubble" of overpriced content in China. He explained that irrational pricing and disorderly competition have made it difficult for Chinese online video providers to make ends meet, and that advertising revenue has not been able to cover the costs for the Web sites.

"VCC offers economies of scale. It may bring order to the industry and push prices down," Liu said.

The alliance comes a month after China's top two streaming sites, Youku and Tudou, announced their plans to form a new entity which they say will become the biggest video site in the country, and will be completed in the third quarter of 2012. As of Q4 2011, Youku had the biggest share, 21.8 percent of China's online video market, followed by Tudou with 13.7 percent, Sohu at 13.3 percent, and iQiyi at forth place with 6.9 percent, according to research company Analysys International.

Sohu's CEO Xu Weifeng had also said earlier this month that the company was open to acquiring competitors to boost its online video offerings, but did not state if it will buy online video service provider, PPS Net TV, rumored to be on sale.

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