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Layoffs and price increases have become the keywords of iQiyi at the end of the year.
On December 1, iQIYI broke the news that the non-core business layoffs were 20%-40%; on December 15, a year after the last price increase, iQIYI once again announced a membership price increase, and the continuous monthly price of its gold members rose from 19 yuan / month to 22 yuan / month, and the monthly price of the individual package rose from 25 yuan / month to 30 yuan / month, and the price of the continuous package remained unchanged.
The ongoing content burn war has proven difficult to sustain. Obviously, the IYoutengs hope to have a better model at both the cost and benefit ends to deal with the current dilemma. After iQIYI took the lead in opening the second round of membership price increases, "general increase" is likely to become a trend of long video websites.
It is undeniable that long video has always been an industry that carries the content ecological revolution. Thanks to the exploration of Aiyoutengmang, the pattern of online content in China has undergone a complete change in the past decade, and exciting model innovation and blockbusters during the period are not uncommon. In 2018, iQiyi successfully went public, coming to the moment when it was closest to Netflix, which its founder Gong Yu enshrined.
But the road to becoming Netflix is long. The hot money fight has forced the long video industry to pay an excessive premium content cost; the short video halfway kill has added obstacles to the long video has not completely run through the profit path. In order to maintain its content innovation capabilities, iQIYI has "fed" a team of more than 8,000 people – almost three times as many as Tencent Video and Mango TV.
On the cusp of the storm, it's always easier to criticize than to build — especially this group of long-content entrepreneurs who are treated as "capital" but are actually bitter. Ten years of exploration can not burn a healthy industry, long video while throttling, how to reasonably "open source" has become the most important thing.
In the past ten years, almost china's top content people have experimented with their own ideas on aiyou tengmang, and super network roundups and super network dramas have also given many young content people the opportunity to quickly explore and grow. Rather than being stuck in the same place, we believe more people would like to see the industry truly get rid of the chronic disease and enter a new stage.
Not only to lay off employees, the key to throttling is to optimize the cost of content
If the cost is too high, then reduce the cost. However, large-scale layoffs do not cure the symptoms.
According to the financial report, iQIYI's cost items are mainly divided into three major segments: revenue costs, sales, general and administrative expenses, and R&D investment. In the third quarter, iQIYI's total cost was 8.957 billion yuan, accounting for 78%, 14% and 8% of the overall cost, respectively.
According to the convention, employees' salaries, benefits, etc. are generally calculated in the latter two sections, and the sum of the two proportions is only 22%. Moreover, overheads have fallen by 9% year-on-year. This is enough to show that layoffs should not be the focus of throttling. Take a higher proportion of revenue costs to move the knife, the effect should be better.
This brings us to the online video industry's persistent problem – the cost of content. Among them, the sky-high copyright of the head film and television drama works has always been a major item of burning money on various platforms.
Chart source: Variety News
Tencent's financial report shows that the cost of Tencent's content in 2020 is 58.2 billion yuan, and Tencent Video accounts for a large proportion of it. Last year, Sun Zhonghuai, vice president of Tencent and CEO of Penguin Films, also revealed that the content cost invested by Tencent Video in the past three years has exceeded 50 billion yuan, and it will still invest more than 100 billion yuan in the next three years.
Moreover, the higher cost of content is based on the shrinking scale of content. Gong Yu mentioned on the analyst conference call of the 2021 third quarterly report, "Until now, the number of our movies on the line is not as good as half of that in 2019, that is, half of the same period; the proportion of traditional TV dramas is even smaller, which may only be about 1/3 of previous years; new online dramas facing young people are delayed because of the epidemic and because of government review." ”
This means that at the moment of content supply shortage, the copyright dispute for online videos has become more expensive.
Therefore, optimizing the cost of content is the first breakthrough in the online video business model. The urgency of controlling this expenditure to make the overall operating cost controllable is becoming increasingly prominent.
Eat more than one fish for growth, the premise is to grasp the certainty
While throttling, the platform must also expand new profit points, that is, open source. Only in this way can the future growth story be fuller.
Gong Yu proposed the business model of "apple orchard" and "one fish to eat more" to this end, hoping to fully develop the value of all links in the content industry chain. Ideal fullness, but focusing on reality, the premise of eating more than one fish is to catch the fish, and the stable monetization of the online video industry is based on two deterministic development factors, content and users.
On the one hand, online video is essentially content-driven growth, and commercial growth is built on high-quality content.
Providing content services to the public is the fundamental mission of online video platforms. In daily life, the head platform does play an irreplaceable role.
Relying on the appeal of content and IP, we will promote the rapid growth of advertising revenue. Or continue to extend to other links in the industrial chain and do IP-derived business. Tracing back to the source and continuously producing high-quality content can the diffusion of the business have a foothold.
For example, the financial report shows that Mango TV achieved a net profit of 1.98 billion yuan in the first three quarters of this year, exceeding the level of the whole year of 2020. Behind the data, "Sister Riding the Wind and Waves 2" set a record for the largest amount of investment in domestic variety shows, and "Brother Who Cut Through Thorns" also won a number of brand sponsorships after its broadcast.
On the other hand, pay attention to the cultivation of user payment habits in order to achieve more efficient conversion of platform traffic.
The payment paid by users when they enjoy content services is the direct source of revenue for the platform. Netflix's earnings report showed that in the third quarter, many of its indicators exceeded expectations, such as an increase of 4.4 million paid members, much higher than the expectation of 3.5 million, which is directly related to its blockbuster "Squid Game" and other works in the quarter. According to internal estimates at Netflix, the production cost of $21.4 million for "Squid Games" will generate a profit of 40 times the cost, nearly $900 million.
Looking at the revenue structure of each platform, the proportion of paid membership revenue has increased by leaps and bounds in the past few years, and has surpassed advertising to become the big head, and the platform must pay enough attention to the user's willingness to pay. For example, iQIYI's membership service revenue in the third quarter was 4.288 billion yuan, accounting for more than 56% of the total revenue.
At the same time, the scale of paid membership in the industry is already quite considerable. As of the third quarter, iQIYI had 103.6 million paid members and Tencent Video paid members of 129 million. The membership size of more than 100 million shows that even in the face of the strong impact of short videos, users' recognition of high-quality content on online video platforms is still unquestionable.
Therefore, the platform should give full play to its guiding role. For users who have successfully converted, the key is to guide re-consumption, and the preferred target of other new businesses mentioned earlier should be these users who are more willing to pay. For potential users who have not yet paid, the platform should focus on guiding consumption to break the ice and develop payment habits.
Lack of quality content to attract users. Without a user base, the content is not cared for, and the road to monetization is equivalent to being blocked. As a result, content and user payment habits are two important starting points for the long-term profitability of online video platforms.
Pain points and inflection points
With increased competition, user questioning, strict regulatory scrutiny, capital decline, and collective pressure from all sides, online video platforms seem to have reached the lowest point in history.
However, if you change the perspective, the misfortunes and blessings rely on the blessings and misfortunes, if you can think about the pain in this eventful autumn, recognize the problems of your own business model and adjust them, the platform is likely to find an inflection point for profitability.
Based on the analysis above, we can summarize at least two feasible ways.
First, produce high-quality content at a controllable cost, solve the existing cost pressure, and cultivate core competitiveness for future income generation.
For example, in addition to the content of Netflix, its actor income model, drama creation model and membership model are also different from the business model of mainstream domestic online video platforms. In terms of copyright and partner sharing, it is more lightweight than a sky-high buyout; the creation of the series is based on the ratings, and if the audience response is not renewed, the stop loss is achieved in time.
For another example, under the Hunan Radio and Television System, Mango TV obtained the exclusive copyright of high-quality content at a controllable cost in the early days, and then vigorously developed its self-made business, which has a significant cost advantage compared with the tens of billions of content investment of other platforms in the industry.
At the same time, the platform should continue to strengthen the self-control ability of variety shows and dramas. It can reduce the dependence on copyright procurement and ensure the continuous output of high-quality content.
For example, in terms of self-made content, although the input-output ratio has also encountered some doubts, iQiyi's self-made content is still one of its biggest innovations, which has also significantly helped to improve the cost structure. Gong Yu said that iQiyi has established 50 content studios to support self-produced content;
Second, enrich the rights and interests of members, innovate the payment model, and create a good payment environment for users.
In all consumer industries, users' payment decisions cannot avoid the link of payment recognition and value recognition. That is, before deciding to spend money, recognize the value of the product.
For video platforms, in addition to attracting users to pay for the quality of the content, the benefits of payment are also crucial. Moreover, rights and interests should not only meet the needs of users, but also ensure that they are fulfilled. Grasp the content with one hand, grasp the rights and interests of members with the other hand, and truly achieve value for money, even if the price of the service is raised, as long as it does not cause too much payment resistance within a reasonable range.
It is foreseeable that the value of premium content will be realized more through membership fees rather than advertising in the future. Looking at the list of Aiyou Tengman's 2022 drama variety, multi-track variety shows and multi-genre drama reserves are still sufficient, iQiyi will produce a number of realist dramas such as "Heart Residence" and "Human World", Tencent Video continues to cultivate in the sequels of the high-reputation IP "Qing Yu Nian" and "Ode to Joy" series; Mango TV's emotions, brothers, and mysteries also have a large number of works that have achieved long-term reputation to be broadcast.
Moreover, compared with the model and charging standard of foreign member services, the paid membership price of the domestic mainstream platform is not expensive, and the price increase under the premise that the user can accept it is a performance growth point for the platform in the future.
The road is winding and bright. Platforms are seeking new directions for open source, cost reduction and efficiency increase, and in the market where the awareness of payment has been initially established and gradually improved, a healthy industry that can continue to produce good content at a reasonable cost is the next stage of long video that everyone is happy to see.