Baidu’s bid to acquire Joyy’s live-streaming business for China has lapsed, dealing a blow to the search engine giant’s advances into the digital video arena.

The Beijing-based company said its US$3.6 billion deal for Joyy’s YY Live has expired three years after it was unveiled because regulators did not approve the transaction by Dec 31, a filing to the exchange on Monday (Jan 1) indicated. The deal was previously slated to close in the first half of 2021.

Moon SPV, an affiliate of Baidu, terminated its share purchase agreement with Joyy because certain conditions had not been met, including “obtaining necessary regulatory approvals from authorities”, the statement said.

Baidu first announced the acquisition in November 2020 as part of a strategy to broaden its content offerings to better diversify its revenue. That approach has become less relevant over the past year as the tech industry’s focus has turned to generative artificial intelligence, in which Baidu has been seen as an early domestic leader.

The setback marks another challenge for Baidu’s efforts to catch up with upstarts such as ByteDance in the online entertainment arena, after its relatively late start in newer spheres such as live-streaming. Joyy was one of the pioneers of Chinese live-streaming. Its networks for live-streaming games and sharing videos attracted 1.61 million paying users globally. The company’s China-based revenue reached US$236 million in the first nine months of 2023.

Beijing in recent years has clamped down on multibillion-dollar deals, as it seeks to rein in a private sector that it deemed to have amassed too much power and expanded recklessly. The government has since signalled an easing of its crackdown on the tech industry in part to revive spluttering growth in the world’s second-largest economy.

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Regulators were seen as unlikely to approve Baidu’s deal with Joyy given President Xi Jinping administration’s years-long efforts to combat gaming addiction, including with controls for minors on online entertainment and freezing approvals for new gaming titles. China’s top gaming regulator rolled out draft rules designed to further curb time and money spent on games last month, only to appear to soften its stance after an US$80 million market rout that pummelled game publishers such as Tencent Holdings and NetEase. Bloomberg