The merger of iQIYI and PPS marks the collapse of the video industry's fairy tale. It is no longer a business that can get returns by relying on intelligence, diligence and ability, but has become a part of China's Internet that is most like a traditional mature enterprise with the change of competitive factors. Xia Yongfeng, the main writer of Commercial Value
On May 7, 2013, following the merger of Youku and Tudou, the Chinese video industry again joined forces: Baidu announced that it would acquire PPS video business for 370 million dollars in cash and merge it with Baidu's video website iQiyi. According to iQIYI citing the data of iResearch, after the merger, "the scale and duration of users of the whole platform have reached the first in the industry".
At the beginning, Baidu actually gave more traffic resources to iQiyi, but after that, it once increased its shares, and iQiyi became a company under Baidu. Until today, Baidu has paid hundreds of millions of dollars for the merger of iQIYI. Why?
Since the rise of the video industry in 2005, the entire market has experienced multiple rounds of competition and elimination, and by 2012, it has actually entered an era of vertical and horizontal integration. Especially after the merger of Youku, the market leader, and Tudou, the second in the market last March, the pattern and competitive factors have undergone fundamental changes.
The key node actually appeared in the successive listing of Youku and Tudou in 2011. Before that, the cake of China's video market has been growing, and each company has to eat it separately. The competition is about expansion speed and capital balance. Who can eat enough cake without being stuck. At this stage, self growth is more important than peer competition.
However, after that, Youku and Tudou went public and Sohu, Tencent and Baidu launched their own video businesses one after another, rapidly raising the threshold of video business; At the same time, the growth rate of the cake has slowed down and the competition has intensified, from competing for users to competing for high-quality video content, which has led to further uncontrolled growth of copyright. At this stage, video has entered the capital competition, which is about who can spend more money, buy more content, and obtain more users (not new users, but users snatched from the teeth of competitors).
Such a strong pressure situation forces some larger video websites to be on the high voltage line, and the direct result of the high voltage is consolidation. When the industry concentration rises, it is bound to lead to the improvement of the voice of video websites on upstream content and downstream users, which not only produces large-scale advantages, but also crowds out more space because they are in a stronger position in the game.
Stronger companies, such as Youku, the industry leader, directly attacked Tudou. The chain reaction was that companies ranked next in the video industry, including the capital to enter the video companies, had a sense of urgency.
These companies can count with one finger: Tencent Video, Sohu Video, iQIYI, etc.
Therefore, when the market environment changes and the pattern changes dramatically, the competitive factors of the video industry have actually changed fundamentally.
On the one hand, the merger of iQiyi with PPS is the release of pressure after Baidu's "too much cash", and more importantly, based on the above logic, it directly absorbs more channels, users, and advertising space by means of acquisition, and obtains greater voice over copyright.
According to iQIYI CEO Gong Yu It is said that the video industry will inevitably enter the "oligopoly era", "conservatively speaking, by the end of this year, there will be only three or five players on the court".
More directly, iQIYI PPS has thus become the second big man after Youku Tudou, leaving Tencent Video and Sohu Video, as well as PPLive and Storm Video, which can only look for mergers and acquisitions or vertical development in the new competitive landscape.
In this situation, the competitive factors have nothing to do with how well a video company does, how strong the Internet technology genes are, and how powerful the media capabilities are. In this increasingly mature industry, to become the next big man, the competition is whether you have enough capital and integration ability to swallow another big fish.
If Tencent Video still seeks to develop independently, it may still be in danger of being dumped under the current situation, because the independent traffic of video websites has supported a strong sustainable development model, and Tencent cannot blindly direct more of its traffic to videos.
If Tencent has the capital and just hesitates, the situation of Sohu Video will be even more difficult. In fact, Sohu Video has been operating quite well, and it can even be said that it has achieved perfection in playing content and commercial transformation, but these are still not enough to make up for the shortcomings from users to advertising display space, because the commercial transformation ability of each content in each video box is ultimately limited.
"The stock price of Sohu does not meet the real value of Sohu at present." Zhang Chaoyang, chairman and CEO of Sohu's board of directors, said, "So (doing capital mergers and acquisitions), it is very bad to buy stocks; it is even worse to buy with cash." This may reflect the dilemma of Sohu Video, which has been doing well.
However, on the contrary, it also means that Sohu has considered a lot of M&A possibilities. When talking about the topic of capital, Zhang Chaoyang's last sentence is, "I can only talk about here".
When the video industry has entered the oligopoly era, it has become impossible to gain competitive advantage by relying on such factors as intelligence, diligence and strong ability.
Baidu paid for iQIYI's merger with PPS because it understood that there were no fairy tales in the world of video oligarchs. At least in the foreseeable future, the variables will become less and less, the industry will become more concentrated, and the situation will become increasingly stable.
Until one day, "long separation must be combined, long cooperation must be separated", Gong Yu said, "the changes in terminal and content consumption brought by future technology will create new opportunities in the market and many new competitors". However, this may be the story five or ten years later.
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