Baidu Inc, China's largest Internet search engine, is planning to enter the film production sector with a newly established venture — Aquamen Entertainment, according to The Hollywood Reporter.

The venture will be based in Los Angeles. The first feature from the company will be a $40 million animation feature — Kong, based on the Chinese classic novel Journey to the West but focusing on the original story of the titular character as well as involving Hollywood sci-fi elements, such as aliens and robots, the reports said.

The report also said that the venture will be run by South Korean filmmaker Jeongjung Kim and Chinese producer Gary Zhang. Kong will be developed in partnership with a South Korean animation studio, but it is quite likely to hire a Hollywood director for the production.

The Internet search provider declined to comment on Tuesday.

The venture marks Baidu's founder and Chief Executive Officer Robin Li's first foray into the film production business, despite the company's previous acquisition of iQiyi, a popular online video website.

In May of last year, Baidu purchased PPStream Inc's online video business for $370 million to compete with the country's top online video services provider. PPS will continue to operate as a sub-brand of iQiyi, according to the company statement.

"It's a natural move for Baidu to enter the movie production area at this moment," said Shao Gang, deputy director of consulting for the culture and entertainment industry at Horizon Research Consultancy Group in Beijing.

Shao said: "It's the right time for companies to consider investing in the content production sector while the big picture of the domestic online video broadcasting channels has almost been set, making it more difficult to exploit profit in the industry."

"The need for providing exclusive video content has become more and more urgent among the online video providers," said Shao.

So far, dominant online video platforms include Youku Tudou Inc and iQiyi.

"As an Internet search engine giant, Baidu has good resources and platforms to promote its productions as well as marketing campaigns," said Huang Qunfei, general manager of Beijing New Film Association Co Ltd, one of China's largest theater chains.

Also, its adequate supply of capital makes a great advantage in the filmmaking sector, which involves high risk for investment returns, the industry analysts said.

The IT giant reported total revenues of $8.89 billion in the third quarter of last year, up 42.3 percent year-on-year, according to the company's financial reports.

Analysts also said it will be a boost to China's animation features production, which has lagged behind its Hollywood counterparts for a long time.

"But signs have shown that Chinese animated films are improving in quality thanks to the development of technologies and growing investment," said Liu Cuiping, a research manager at EntGroup Consulting, a Beijing-based entertainment industry consultancy.

Of the highest-grossing animation features last year, five domestic productions made it onto the top 10 list, with the most successful reaching fourth place, according to the EntGroup Consulting.

The US animated film The Croods topped the list with total ticket sales of 393.9 million yuan ($65 million), while The Mythical Ark: Adventures in Love & Happiness, the fourth-place domestic animated feature, took in only 124.9 million yuan in box office, statistics from EntGroup Consulting showed.

"There will be a growing trend in the industry for content producers to team up with Internet media operators, as more and more industry insiders have found that content production develops far behind the content distribution platforms," said Shao.