Domestic long-form video platforms, represented by iQiyi, Youku, and Tencent Video, have struggled to make a profit for years, but few people have paid attention to how much money they have lost.
Recently, the news of large-scale layoffs in the industry has attracted attention from the outside world. According to the Economic Daily, "Aiyouteng" has burned more than 100 billion yuan in ten years, and so far there is still no sign of profit.
Burning money is certainly not a long-term solution, and the future of long video platforms is becoming more and more confusing.
What has been exchanged for ten hundred billion years of investment?
The reason why long-form video sites don't make money is actually very simple: they can't make ends meet. It sounds like "nonsense literature", but behind it is a problem that video platforms have not been able to solve: revenue cannot offset costs.
"Inner volume" is one of the most popular keywords in China in the past two years, and if you want to define it, then "invalid competition" may be the easiest to understand.
The original intention of competition is to promote the development of the entire industry in a better direction, but if there is a mistake in the direction, it will not only not promote the development of the industry, but will fall deeper and deeper in the endless internal friction.
The competition between Aiyouteng is, to a large extent, "ineffective".
For these platforms, the ultimate goal is to compete for traffic. If you want to get traffic, you need explosive resources, how to get resources? Quite simply, throw money. Some people say that if this money is invested in the script, special effects, shooting details, etc., it will naturally make the quality of domestic film and television content go up to a higher level, but unfortunately, the road has gone astray later.
Since 2015, major capital has frantically poured into the long video track, and the price of TV series rights has risen. According to the "2017 China TV Drama Industry Survey Report", the average price of the video website's copyright investment in a single episode of head content reached 7.81 million yuan, which was more than 6,000 times higher than that of "Wulin Waichuan" 10 years ago.
In response to this problem, in 2018, the Central Propaganda Department and other five departments jointly issued the "Notice on Tax Evasion and Other Issues in the Governance of the Film and Television Industry's Sky-high Film Remuneration "Yin and Yang Contract"", which clearly stipulates the implementation standards for film and television program remuneration. However, the 160 million yuan film remuneration of a well-known actress that broke out in April this year shows that all kinds of loopholes still exist.
Actors with empty images but poor business capabilities have taken away a large part of the budget of the work, and the budget for screenwriting, costumes, special effects, etc. is naturally insufficient, which makes the quality of film and television works continue to decline, and the audience will not buy it.
In 2006, the online copyright single episode of "Wulin Waichuan" sold for 1250 yuan, and the online copyright single episode of "Zhen Huan" in 2011 sold for 300,000 yuan, and after 2017, this number has soared to 10 million. It's no wonder that video platforms have repeatedly raised membership prices and inserted ads in fancy ways.
But in the past few years, how many works have reached the level of "Wulin Wai Biao" and "Zhen Huan Biography"? Has the domestic film and television industry as a whole improved or regressed? What did the platform giants end up in exchange for their money-burning wars? Perhaps the unoppositive financial reports of aiyouteng have given us the answer.
Is the route of film and television quality easy to go?
The cost is too high, the audience does not buy the problem of in fact, Aiyouteng himself can also realize, so in the past two years, he has begun to control costs through the model represented by self-made dramas, while improving the quality of content, and the success of works such as "The Hidden Corner" also represents the audience's higher recognition of this model. Does this mean that the film and television boutique strategy can solve the dilemma of long video today?
Perhaps some clues can be seen from the experience of foreign video websites.
Today, the most well-known foreign film and television content platform is Netflix, which has embarked on a very different route from domestic platforms: no advertising, no free content, and 98% of the revenue comes from membership subscription fees. But with such a "single" revenue structure, Netflix has achieved profitability.
Netflix's third-quarter earnings report showed that in the quarter, the net increase in global paying subscribers increased by 4.4 million, doubling year-on-year; revenue increased by 16.3% year-on-year to $7.48 billion; and net profit increased by 83.4% year-on-year to $1.449 billion.
So why is Netflix profitable? Is it because the subscription fee is more expensive than domestic video platforms? Apparently not.
The core of what a video platform can attract is naturally great content, which is the key to Netflix becoming the number one in the streaming industry. From "House of Cards" to "Bojack the Horseman", from "Love, Death, Robots" to "Squid Games", Netflix's ability to produce blockbuster works is extremely strong, and the impact can always radiate to the world. Take "House of Cards", for example, this drama alone has brought 20 million new members to Netflix, and I am afraid that there has not been such an influential work in China in recent years.
At the same time, Netflix's cost control is also very reasonable. In 2018, Tencent Video spent 9 million yuan per episode for a total price of 783 million yuan in order to obtain the copyright of "Ruyi Chuan". In contrast, the squid game that has just become popular around the world cost only $21.4 million, or about 137 million yuan. The cost gap is so vast (if inflation is taken into account, it will make the gap appear even bigger), people can't help but ask again, where did Tencent's money go?
But Netflix's beautiful financial report data does not mean that film and television quality is a road to profitability. CEO Reed Hastings reiterated this year that there is still a long way to go and many difficulties.
The most obvious difficulty is the epidemic. Although the video platform represented by Netflix can be regarded as the "beneficiary" of the epidemic, it also represents the recent rapid growth of the accident, Netflix said in an open letter to shareholders in April this year: "With the unblocking of countries, growth may slow down." ”
In addition, the epidemic will also have an impact on the production of Netflix. Netflix has previously admitted that many of the episodes broadcast from last year to this year have been produced or entered the later stages before, and this year's content shooting in many places has stagnated. In other words, Netflix is now largely depleting inventory, and in the long run, if the epidemic is not alleviated, then its content broadcast will inevitably be affected.
A more critical issue is that although Netflix's earnings report shows profitability, its cash flow is still unstable.
In 2019, Netflix reported a net profit of $1.867 billion, but its net cash flow was negative $2.887 billion. This has to do with Netflix's costing approach: when the content isn't online, Netflix doesn't count its production expenses in the profit for the year, but rather as a content asset, which is amortized over several years after the content goes live. That said, Netflix's annual spending on content production is actually an overdraft of revenue for years to come.
In the 2019 financial report, Netflix's cash expenditure was $14.61 billion, and the amortization expense was only $9.216 billion, which led to the generation of cash flow and the expansion of Netflix's debt.
The situation improved by 2020, with cash flow reaching $1.9 billion, turning negative, but Netflix executives admitted that this was largely due to the delay in production of the show due to the epidemic, which temporarily reduced long-term investment. Sure enough, by the second quarter of this year, Netflix's cash flow had become -175 million US dollars.
The instability of cash flow makes Netflix need to borrow money to survive, and in theory, as long as it can maintain stable revenue, this business model can be completely sustainable. However, Netflix is also facing increasingly fierce external competition. At present, other streaming platforms in the United States are using price wars to launch a siege against Netflix: Apple TV +4.99 US dollars / month, Disney + 7.99 US dollars / month, Hulu 5.99 US dollars / month (no ads version of 11.99 US dollars) subscription prices, are lower than Netflix's single-month price of 8.99 to 17.99 US dollars.
In addition, other media platforms have also begun to move towards mergers, which will usher in new changes in the market landscape of streaming media.
Competitors like Apple, Disney, and Amazon have other businesses to do the math for the video business, and Netflix can only rely on itself. Therefore, although Netflix is currently sitting in the top spot of streaming platforms, no one can say how long he can do this position.
So, since today's most successful video platforms have so much uncertainty, how should long video platforms evolve next?
Tuowei may be a path that must be chosen.
Competitors are not only peers
Who are Netflix's competitors? Ordinary people may think of streaming peers such as HBO Max and Disney+, of course, but not only them.
Netflix executives have repeatedly said that from sleep to social media to gaming, anything other than watching Netflix can be seen as a potential competitor to Netflix. Therefore, apps such as TikTok and Instagram that have swept the world are also the objects that Netflix needs to challenge.
Against this backdrop, Netflix has chosen to grow more businesses. In November, Netflix officially added games to their content lineup, and all members can enjoy them at no extra cost.
The number of Netflix games is not much at the moment, but it is worth noting that many games are adapted from Netflix's own IP. From this, we can vaguely see some of Netflix's planning for games, the current Netflix is still providing some relatively simple mobile games, but this is obviously just an experiment, if the promotion effect is good enough, they are entirely likely to adapt their own IP into a larger AAA game, which is also the biggest potential of Netflix's game business.
The reason why Netflix developed games is to enhance its use and entertainment value to users, so as to compete with larger competitors for the time of users, especially young users. Some analysts said: "Netflix has always said that games are a major competitor of their current, and now they also make games, perhaps as the saying goes, 'if you can't beat it, just join it'." ”
In China, the competition faced by long video platforms is not only from each other, short videos are a clear "public enemy". In order to deal with this thorny enemy, domestic long video platforms have also been united.
In April this year, Tencent Video, Youku and other platforms joined hands with more than 500 artists to jointly call on relevant departments to carry out compliance management of copyrights on short video platforms. Since then, the editing content of common film and television works on short video platforms has been focused on suppression.
According to the "2021 White Paper on Copyright Protection of Short Videos in China" released in June, the 12426 Copyright Monitoring Center monitored 13 million original short videos and secondary creation short videos of films and television comprehensive works, and accumulated 3 million infringing accounts, a total of 14.786 million erchuang infringement and 4.1631 million original infringing short videos.
On December 15, the China Online Audiovisual Program Service Association issued the 2021 edition of the "Detailed Rules for the Standard Review of Online Short Video Content", which clearly stipulates that short video programs must not appear in "unauthorized self-cutting and adaptation of movies, TV series, online film and television dramas and other types of audio-visual programs and clips". For long video platforms, this is undoubtedly a major benefit in their competition with short video platforms.
The idea of "can't fight but join" is also reflected in these domestic platforms, iQiyi has entered the short video track through the express version, Youku also added a short video partition last year, Tencent Video although the action is not large, but Tencent has not given up the pursuit of short video, has pushed micro-vision and video number.
The long video platform's Tuowei is also happening, for example, iQiyi has entered the VR track. Similar to the idea of Netflix's entry game, iQiyi also chose to use its IP lineup to expand its territory on the new track, creating VR-derived interactive videos such as "Love Apartment 5" and "Youth with You 2", and also launched a series of VR original works.
Long and short videos, games, VR, the Internet is essentially a business that competes for users' time and attention, in order to achieve this purpose, it is not surprising that major video platforms have launched any business that seems to be incompatible with video.