Alibaba and Tencent are both said to have held talks over a potential takeover of the streaming service dubbed the ‘Netflix of China’.
The two tech titans have been in discussions with search giant Baidu over a deal to acquire a controlling stake in iQiyi, Reuters reported.
However, talks are said to have stalled after both suitors baulked at the $20bn (£14.9bn) price tag demanded by Baidu, while looming tech regulation in China has also derailed the process.
Bytedance, the Chinese tech giant that owns viral video app Tiktok, has also held internal discussions about a potential bid, according to the report.
iQiyi, which is considered China’s equivalent to Netflix, is listed on the Nasdaq with a market value of $16.4bn.
This values Baidu’s roughly 56 per cent stake at $9.2bn — less than half the $20bn it is asking. Tencent is said to be seeking a valuation closer to $10bn for Baidu’s controlling stake.
While iQiyi is one of the major players in China’s streaming market — alongside Alibab’s Youku and Tencent Video — it is yet to turn a profit since its inception 10 years ago.
In the third quarter the company reported a decline in both revenue and subscribers, while its shares have dropped nearly 20 per cent in the last two weeks alone.
iQiyi is now reportedly planning to raise at least $1bn in the coming months as it looks to get back on track. The company has been contacted for comment.
A successful takeover by Alibaba or Tencent would give the winning bidder a commanding dominance in China’s streaming market.
But it comes amid the looming threat of regulation as Beijing looks to curb the power of Chinese tech giants.
Days after blocking Ant Group’s $34bn initial public offering, authorities unveiled draft new laws aimed at preventing anti-competitive behaviour by tech firms.