(Yicai Global) Feb. 9 -- Toutiao, the Chinese news app backed by Sequoia Capital LLP, will acquire a coveted license to distribute audiovisual content on information networks after agreeing to buy all of Yuncheng Yangguang Culture Media Co. for an undisclosed sum.
Toutiao signed an agreement with Shanxi-based Yuncheng Yangguang on Feb. 7. The license will help reduce policy risk and uncertainty, giving Toutiao a competitive edge.
China's media regulator listed 588 companies as license holders as of last May, most of which were state-run press and publishing outlets as well as public institutions. Toutiao will join other licensed private businesses that include Sohu Inc. [NASDAQ:SOHU], Tencent Holdings Ltd. [HKG:0700], Beijing 6rooms Technology Co. and Youku Tudou Inc. [NYSE:YOKU].
Toutiao's USD50 million purchase of US short video app Flipagram earlier this month gave away its ambition in the sector.
Easily produced and disseminated short video clips have become the new magic bullet for generating online traffic and a focus for Chinese regulators. Several rules issued in rapid succession have made it hard for companies operating such businesses. The media watchdog issued a document in September requiring websites to ensure compliance with live streaming service regulations.