The deal between Baidu (BIDU) and Viki is actually pretty exciting both from a consumer, but also business standpoint. Viki is perhaps the Netflix (NFLX) or Hulu for the Asia Pacific, and it's well … interesting.
Currently, There's no way to get a direct ownership stake in Viki as Viki was officially bought out by Japanese ecommerce giant Rakuten (OTCPK:RKUNF), for a hefty sum of $200 million. So we have to play this from the context of being a Baidu or Rakuten shareholder, which isn't bad, but if I had a choice I'd much rather own Viki directly because of the growth potential.
Currently, Baidu has been able to get a huge face lift with the addition of Viki video services. The way it works in the orient is that you have a multitude of different languages, and as a result production budgets can't easily scale. Unlike in the United States, you can film blockbuster titles, and hope to sell the product in North America, Australia, and Europe and reach a pretty significant chunk of the global available market. Then you can include subtitles to reach certain niche markets in the Asia, Middle East, and South America.
However, in Asia you have a plethora of different languages and films being produced in Japan, China, South Korea, Philippines, India, Thailand, Indonesia and etc. Much of the film content has a hard time penetrating other markets, and that is where Viki sort of comes in. Viki has built a web based video viewing platform that allows different contributors to contribute subtitles to a TV series. I would know, because I'm able to speak Korean, and as a result I have written a couple of English subtitle here or there for a couple Korean TV shows. Viki is also where I go to watch my favorite Korean, Japanese, and Chinese TV series. When it comes to Asian TV series the production budgets aren't exactly fantastic when compared to AMC original series like the Walking Dead, or Netflix originals, however sometimes you stumble upon a work of art that truly embodies the meaning of great story telling. So what you see with oriental television is a stronger focus on drama, mystery, or crime. This means you'll almost never see sci-fi TV shows in the orient, because sci-fi can't scale very profitably.
Currently Viki has 237 million monthly active users [Viki has more active users than Google+ (GOOG), Snapchat, and Instagram]. What's sort of cute about Viki is that it has geographic restrictions and tries its best to play its card at being an intermediary of content between two different regions of the world. For example, Viki has distribution rights for TV series like Falling Skies, which is owned and distributed by Time Warner (TWX). The executive producer of Falling Skies is Steven Spielberg, so it's a high budget TV series.
High budget TV series from the United States are being distributed in Asian markets through Viki. So the Chinese will be able to watch certain American TV shows with Mandarin subtitles, for free. Well, it's not completely free as Viki viewers have to sit through ads. But it's a great start, because Netflix international isn't growing fast enough to capture a significant share of the oriental market, so it's probably more intelligent for film studios like Time Warner, Lions Gate (LGF), Walt Disney Studios (DIS), and Viacom (VIAB) to chase the Viki/Baidu bandwagon. This goes back to why I'm excited for Baidu, because it's got itself a partnership that is the gateway of entertainment between the orient and the western world.
However what limits the success of this deal for Baidu is that it's not an exclusive contract with Viki. Unfortunately Viki also partnered with other Chinese companies like Renren (RENN), and Sohu.com (SOHU). So unfortunately Viki content won't only be found on IQIYI (Baidu's video streaming service). However with the Viki partnership in place, Baidu can help justify the cost of its $370 million acquisition of PPStream. The PPStream acquisition gave Baidu enough eyeballs to become the largest video streaming platform in China by average time spent and number of users.
So in summary this may not push the needle by much for Baidu, but on the other hand, it will establish Baidu's dominance in the Chinese video streaming market.