30 November 2018

Chinese streaming boom spills into M&A and IPO dealmaking

Online streaming platforms appear to be taking up a lot of bandwidth at the moment; be it news of multi-million-dollar investments, mergers and acquisitions (M&A) or announced/completed initial public offerings (IPOs), it feels as though the ongoing stream of reports have been never-ending in 2018.

Before taking a closer look at video and music streamers, a wider view of the overall sector, according to Zephyr, the M&A database published by Bureau van Dijk, shows the aggregate value of announced or completed M&A deals and IPOs targeting companies involved across the gamut of online activities ranging from software publishing and data processing and hosting to Internet publishing and broadcasting and web search portals in 2018 reached its highest-ever level.

At USD 576,152 million, and there is still another month left in this calendar year, the aggregate value of announced deals targeting the sector has been boosted by multi-billion game-changing acquisitions of Red Hat, VMware and CA, incidentally all US companies.

When focused on interactive, live streaming, video and music sharing and games platforms, Zephyr shows companies based in China, either established in the country or Hong Kong, or as offshore vehicles incorporated in the Cayman Islands or the British Virgin Islands, have carried out some of the largest M&A and IPOs announced so far this year. Currently iQiyi, the Chinese live-streaming service owned by Baidu, holds the largest such deal after raising USD 2,250 million when it floated on Nasdaq in March.

Meanwhile, Tencent Music’s highly-anticipated October debut has since been put on hold, with speculation mounting that the listing may now take place in 2019, though a report by Bloomberg within the last couple of days suggests it could come as early as mid-December.

It is probably worth noting at this point that Tencent Music’s rival Spotify shook up the establishment earlier this year by side-stepping the tried and tested traditional route where an initial public offering is managed by Wall Street financial institutions. Instead, the Luxembourg-registered loss-making music streaming platform pursued a direct listing to give existing registered shareholders a chance to sell off shares in the open market without the need to pay underwriting fees to investment banks.

Notable listings by offshore-incorporated streaming platforms this year have also included Bilibili, Huya, and Inke, which raised USD 483 million, USD 207 million and USD 193 million, respectively.

Bilibili announced its IPO plans just days after rival iQiyi unveiled its own US listing proposal. What separates the Cayman Islands-incorporated, Shanghai-headquartered online video website operator from the myriad of others is its use of the bullet screen function, among other things. This mechanism allows viewers to submit, view, and add commentary subtitles on videos in real-time while watching the clips, and in so doing encourages conversation engagement and interaction. Bilibili features youthful content themed around anime, manga and game fandom and, together, with the bullet option that scrolls the various notes and remarks across the screen, it has attracted a younger audience.

Huya claims to be a leading live game streaming platform in China, with the largest and most active community in terms of monthly active users, of 99.00 million in the three months ended 30th September 2018. Its platform lets broadcasters and audiences interact with each other during live video play via bullet chatting, commenting or gifting. Huya cooperates with e-sports event organisers, as well as major game developers and publishers, and has developed e-sports live streaming as the most popular content genre out of its different offerings.

Inke, meanwhile, decided to go public in Hong Kong rather than in the US and submitted its draft prospectus to the bourse just months after failing to complete a controversial backdoor A-share listing last year. The company has developed a smartphone app that allows users to watch the lives of people who broadcast themselves –displaying talents or their knowledge and skills – in a bid to gain a celebrity status, of a sort. These people chasing fame and fortune can make money from so-called virtual gifts bought for them by users keen to have direct interaction with the app’s up-and-coming or established stars.

Undoubtedly steaming in China is an aggressive market, with platforms operating in the fast-paced, rapidly-changing booming sector vying with each other to reach viewers with the hope of turning them into paying customers, which in turn drives growth across the overall entertainment industry in the country.

© Zephyr