Gong Yu said that iQiyi lacks high-quality content, and on the one hand he wants to “inevitably” increase member prices. Will the user agree to the price increase without good content?
Editor’s note: This article is from the WeChat public account “Radar Finance” (ID: radarcj), author: Li Yihui, editor: Shen Hai.
On May 18, iQiyi handed over its unaudited operating data for the first quarter of 2021. The financial report shows that in the first quarter of this year, iQiyi achieved revenue of 8 billion yuan, a year-on-year increase of 4%; a net loss of 1.3 billion yuan, a loss of 2.9 billion yuan in the same period last year, a year-on-year decrease of 55.17%.
From the perspective of revenue organizations, membership business, which accounts for about 54.12% of total revenue, is still a major pillar of iQiyi. However, this part of revenue has shown signs of shrinking.
According to the financial report, in the first quarter of this year, iQiyi’s membership income was 4.312 billion, a year-on-year decrease of 7%; subscription members decreased from 118.9 million in the same period last year to 105.3 million on March 31, 2021, and the number of members fell by 13.6 million, a year-on-year decrease A reduction of 11.44%. The number of members was obtained under the fire situation of “Zuo Son”.
For the slowdown in membership business growth and income fluctuations, Gong Yu, CEO of iQiyi, explained that short videos and other diversified entertainment methods squeeze user time, and the root cause of the squeeze is still its own high-quality content. Relatively scarce.
In addition, iQiyi has given guidance for the second quarter of 2021. It is estimated that revenue in the second quarter of 2021 will be 7.65 billion, a year-on-year decrease of 3%.
In terms of stock price, the stock price of iQiyi, which has frequently fallen into negative territory, has recently hit a record low. As of May 19, its market value was only equivalent to a high of 30%.
The profit problem is unresolved, but revenue is declining. Does iQiyi still have a chance to convince investors?
Continue to lose money, revenue growth continues to decline
Loss has almost become synonymous with long videos, and iQiyi bears the brunt.
On May 18, iQiyi released its unaudited financial report for the first quarter ending March 31, 2021, and the company continued its losses again.
In the reporting period, iQiyi’s revenue was 7.968 billion yuan, a year-on-year increase of 4.16%; the net loss was 1.257 billion yuan, a loss of 2.875 billion yuan in the same period last year, and the loss narrowed by 55.93% year-on-year.
Although the loss amount has narrowed, it does not mean that iQiyi can stop the loss in the future. In the third quarter of 2020, iQiyi had a single-quarter net loss of 1.2 billion yuan. In the fourth quarter, the loss expanded to 1.5 billion yuan.
Iqiyi is still running wildly on the road of loss, and the accumulated amount is not small. Flush iFinD data show that from 2015 to 2020, iQiyi’s net losses were 2.575 billion yuan, 3.074 billion yuan, and 37.3.7 billion yuan, 9.61 billion yuan, 10.277 billion yuan, 7.07 billion yuan, plus a net loss of 1.257 billion yuan in the first quarter, total losses of 36.988 billion yuan in more than 6 years.
Looking back at revenue, during the reporting period, iQiyi’s revenue was 7.968 billion yuan, slightly higher than the average expectation of 12 Wall Street analysts, and also higher than the company’s expectations at the end of the previous quarter. This time, revenue has regained growth and changed the company’s revenue decline in the third and fourth quarters of last year.
As a first-line video platform, iQiyi didn’t have many hits in the first quarter of this year, and only one “Zui Son” barely made it a hit.
According to the shareholder letter issued by iQiyi, during the hit period, “Zuo Xie” has been played on more than 180 million devices. As of the end, the number of chasing member accounts has exceeded 64 million, promoting the first quarter The peak number of members rose to a level close to the end of the first quarter of last year. Even so, iQiyi failed to return to the double-digit high growth track in the past.
Another hidden worry about iQiyi’s revenue is that revenue growth has been declining.
Data from Flush iFinD shows that from 2016 to 2020, iQiyi’s total revenue growth rate will be 111.29%, 54.65%, 43.79%, 16.03% and 2.46%, respectively.
On May 13th, Gong Yu said at the “iqiyi world conference” that there are many problems in the film and television industry. It is difficult to support the development of the industry with a monetization method. Movie tickets alone will not work, and advertising alone will not work. No, not just relying on members.
Secondly, the film and television industry is the poor temple and the rich monk. “All kinds of people have made a lot of money, and the enterprise platform is losing money.” In his view, the new driving force for the development of the industry still needs to establish the industrialization of film and television.
Obviously, it is difficult to solve these problems in the short term. In addition, iQiyi expects revenue to fall by 3% in the second quarter, with a guidance range of 7.21-765 billion yuan.
Some market participants have commented that iQiyi seems to be losing confidence in future growth, which is not a good sign.
13.6 million members “dropped fans” in one year
For a long time, membership revenue has accounted for more than 50% of total revenue, which is half of iQiyi’s revenue. However, it has also become the main reason for the decline in iQiyi’s revenue growth.
In the first quarter of this year, the number of iQiyi subscription members was 1.05.3 billion, a year-on-year decrease of 13.6 million. Affected by the decline in the number of members, the revenue of subscription members, which is the mainstay of iQiyi’s revenue, was 4.312 billion yuan, a year-on-year decrease of 6.95%. Membership revenue has experienced negative year-on-year growth for two consecutive quarters.
According to past data, in the first quarter of 2020, benefiting from the development of “home entertainment” caused by the epidemic, the number of subscribers to iQiyi members reached 118.9 million in the quarter, but then gradually declined from the high point; at the end of the second quarter of 2020, it was 1.05 100 million, 104.8 million at the end of the third quarter of 2020, and 101.7 million at the end of 2020.
In fact, as early as the second quarter of 2019, the number of iQiyi members exceeded 100 million. Although 105.3 million in the first quarter of this year rose slightly from the previous quarter, it was still less than the 107 million at the end of 2019. Based on this calculation, iQiyi has been lingering at the bottleneck of 100 million members for two years, and it has not yet broken through.
Some analysts believe that there are a fixed group of long-term video consumers, and there are multiple reasons behind the decline in iQiyi’s user data. One of the reasons is that the company “harvested” members several times.
Among the Big Three of the long-term video website “Aiteng” in China, iQiyi is the one that set a precedent for member price increases.
In November 2020, iQIYI will start a price increase. The previous monthly membership card price was 19.8 yuan, and the price increase was 25 yuan; the annual card price was 198 yuan before the price increase and 248 yuan after the price increase.
In addition, iQiyi has also launched advanced on-demand and star diamond membership functions, which means that even if you have paid for members, you still need to pay extra, and you still can’t enjoy ad-free services. These moves towards members have caused dissatisfaction among users, were criticized and ugly, and have been on the hot search list several times.
In response to the price increase, Gong Yu said that this is an inevitable trend. “At that time, one episode of TV series was about a few thousand yuan. Now the copyright purchases for one episode start at two million. If it is broadcast alone, it may cost six million or eight. Millions, so the cost has increased, based on the profitability requirements, it must also rise.”
The users did not agree with Gong Yu’s statement. The reason is that although the member experience has not improved after the price increase, the problem of mid-insertion and patch ads that have been widely criticized, and the problem of paying for individual videos for members still exists.
Gong Yu has another explanation for the reasons for the fluctuation of member income. He said on the financial report call that through data analysis, he found that relatively short video squeeze, the biggest challenge comes from the lack of high-quality content and lack of good content.
In fact, with regard to “good content”, iQiyi has been in the business for several years. In 2016, iQiyi produced more than 20 self-produced dramas, and the web drama “Old Nine Doors” was the industry’s first drama series that exceeded tens of billions. But five years later, iQiyi’s content production capacity does not seem to be as good as advertised, so that “high-quality content is relatively scarce.”
In the letter to shareholders, Gong Yu also admitted that with the reduction of copyright content obtained from traditional channels, “the current quantity and quality of self-made content cannot meet the needs.”
In addition to content constraints, iQiyi is not reconciled to being in a passive situation in response to the squeeze of short videos, and launches Instant and iQiyi. At present, if iQiyi wants to regain the initiative in the short video or what Gong Yu calls “interest content” battlefield, it needs to make more efforts.
Pouring milk “has little effect”, and the stock price hit a new low for listing
After the tumultuous “pouring milk” incident, the market is concerned about the impact of the suspension of the online variety show “Youth with You 3” on iQiyi.
In the conference call after the quarterly report, Gong Yu responded to this, “It is a pity that the final round of the finals was not broadcasted. The Beijing Broadcasting and Television Bureau subsequently issued a new and clear announcement that talent shows can no longer buy products. The way to buy members to vote for the players. Therefore, if you vote for future talent shows, it can only be free. We are still evaluating the impact of advertising revenue, but we initially see that the impact of advertising revenue is, but not It’s huge.”
The industry predicts that along with the suspension of buying tickets and hitting the rankings, not only the iQiyi family, but the entire video industry will be affected to a certain extent. How to realize the commercial value of talent show variety shows will become an urgent problem for all online video platforms.
On May 6, on the day that “Youth Have You 3” stopped broadcasting, JPMorgan Chase lowered its target price for iQiyi from US$18 to US$15.
It is worth noting that the aftermath of the “pouring milk” incident was not over, and iQiyi was fined an administrative penalty of 15,000 yuan for providing vulgar content including swear words.
The Tianyan Check App shows that iQiyi has added a new administrative penalty item. On May 8, iQiyi added a new administrative penalty. The penalty unit is the Beijing Municipal Bureau of Culture and Tourism. The document number of the decision: (Beijing) Wen Zhipu (2021) No. 400358, and the penalty is the music published by the unit. The MV contains bloody violence, sex scenes, and the lyrics contain vulgar content such as swear words.The penalty resulted in a fine of 15,000 yuan.
According to the data, iQiyi went public in March 2018 with an issue price of US$18. By May 13, its stock price fell to a new low of US$12.14 per share since its listing, breaking the issue by 30%.
As of the pre-market on May 19, iQiyi fell 0.29% to USD 13.91, a decrease of about 70% from the high of USD 46.23 on June 19, 2018.