iQiyi (IQ.US) disclosed its fourth quarter 2021 financial report before the US stock market on March 1, Beijing time.
For iQiyi, 2021 is difficult, and there is hardly any good news throughout the year. From the beginning of the year because of bill education stock explosion after being dumped, the second half of the year suffered from the "Internet clear + App advertising rectification + Chinese US stock dissuasion bill" triple supervision, in addition, the long video industry itself is also under the epidemic and short video competition, the growth value is also more and more unattractive.
Dolphin Jun issued a hidden worry warning from the second quarter financial report, and after the third quarter report was broken, it eliminated our core tracking pool, which basically showed our expectations that iQiyi's medium-term development was becoming more and more "desperate".
After reading the four seasons report, although iQiyi after slimming down seems to look a bit clear (single-season operating losses are new lows). But the sacrifice is still a bit big, after iQiyi resolutely cut off other business lines except content, VR, and short video instant (accounting for about 12% of revenue), it also cut off other possible growth imagination in the short term. Dolphin Jun can't help but wonder if iQiyi's proud "one fish eats more" strategy has also wavered?
In the future, iQiyi, which is more and more "focused" on long videos, may only rely on continuous tight clothing to survive this particularly long film and television winter.
1, cut the project + reduce the size of the staff, squeeze out the expected profit.
iQIYI's total revenue in the fourth quarter was 7.39 billion yuan, down nearly 1% year-on-year, which was in the management guidance range and basically in line with market expectations (Bloomberg 7.31 billion yuan). iQiyi's "bitter water" market understands that the decline in revenue is basically within expectations.
However, this time, management did not give revenue guidance for the next quarter (the first quarter of 2022), and the market consensus expected 7.23 billion yuan, down 9.25% year-on-year, which also implied concerns about the impact of the advertising downturn and the lack of pipeline richness on performance. (For management guidance, you can follow the performance call later)
The reason for the sluggish growth of the income side, Dolphin Jun has been elaborated in the third quarter, I believe that everyone is also there for all to see, here will not repeat it.
The eye-catching point of this earnings report is the effect of iQiyi after surviving with a broken arm. At the end of last year, the news of iQiyi's large-scale layoffs detonated the whole network, of course, after this, almost all familiar Internet platforms have launched a wave of layoffs, especially small and medium-sized Internet platforms.
In the news in December, iQiyi's overall layoff ratio was as high as 30%, some departments such as (game centers) were completely destroyed, and even the top pillar of the content department was reduced by more than 30%. The scope of layoffs is not only probationary employees, ordinary employees, but also some middle and high-level executives, and it is conceivable how determined iQIYI is to "slim down".
The reason behind this can be seen from the fact that after the release of the third quarter of Kuaishou's cost reduction and efficiency increase, it can be seen that it has regained the attention of some funds:
For Internet platforms that exchange money for high growth, capital can tolerate and increase support when market sentiment is better. However, in the case of a cold market environment and a deterioration of the competitive landscape in the industry, these companies will also be the first to be abandoned by funds.
Therefore, it can be said that iQiyi's "broken arm" is not only to continue its own life, but also to save the eyes of funds through squeezed profits.
In the fourth quarter, iQIYI's overall operating expenses were 8.36 billion, mainly on the cost side.
1) The cost was affected by the film and television winter (supervision + insufficient consumption + epidemic), actively cutting small and medium-sized projects with low expected heat, and the content cost of 4.9 billion yuan decreased year-on-year, so the gross profit margin improved significantly (from 7.4% in Q3 to 11.9%, 9% in the fourth quarter of 2020), although the market has been psychologically prepared (consensus expectations 8.2%), but iQiyi's reduction is still higher than market expectations.
In the key indicator we tracked[ content cost ratio ] , it also reached a new low in the past year.
2) The expense side is mainly reflected in labor costs and activity publicity, after layoffs, iQIYI's sales and management expenses in the fourth quarter fell by 17% year-on-year, and the 14.8% rate was almost in line with the record low. Research and development expenses have accelerated their growth, which is in line with the strategic direction of iQiyi's adventure VR and intelligent production system.
The restraint of content investment + cost reduction and efficiency increase after reducing the size of the staff, squeezed out nearly 300 million more operating profit than the market expectation (actual loss of 975 million yuan VS market expectation of 1.268 billion yuan)
2, the user scale: once back to the pre-liberation
In contrast, the most ugly thing about the Four Seasons is the size of the subscribers. The number of iQiyi subscribers continued to fall to 96.4 million in the fourth quarter, directly to the level of early 2019. Not only has the epidemic dividend been wiped out, but the growth for the whole of 2019 has also been lost. The content in the third and fourth quarters is actually not particularly short, which shows that the long video peer competition has torn the growth of various platforms, and the erosion impact of external short videos on traffic is still continuing, of course, the price increase in the fourth quarter has also suppressed the needs of some marginal users.
(The caliber of subscribers disclosed by iQiyi in this earnings report has changed from "the number of current monthly members" in previous years to "the number of current daily members".) However, from the result, the number of daily subscriptions excluded from the trial member and the number of monthly subscriptions that have not excluded the trial member are not much different, here in order to facilitate historical comparison, Dolphin Jun regards it as the same indicator)
In the average monthly payment of single users, although the cancellation of the advanced on-demand screening, but iQiyi, Tencent Video against the resistance of offending users, in the last price increase just over a year, it has launched a new round of price increases, taking the standard ordinary package as an example, the monthly unit price increased from 25 yuan to 30 yuan, an increase of 20%, and the price increase of other types of packages is also in the range of 9%-20%.
Although the global long-form video giant Netflix has also raised prices many times in a year, at the same time as the price increase, a number of explosive dramas have swept the world. Compared with the domestic Aiyouteng, the obvious price increase is insufficient.
Although Dolphin Jun has mentioned many times before, iQiyi's ideal price increase space still exists, and to play with the business model, it is necessary for member income to cover the cost of content.
However, after the advertising headwinds, the lack of follow-up content adequacy, and other digital content businesses, membership income is the source of growth that iQiyi relies on in the short term, but it is forced to increase prices without the support of high-quality content, and the traces of loyal users are too obvious - the new low of users can already explain the problem. Therefore, it is difficult to say whether the membership income will see a continuous repair.
3, advertising: the industry cold has been expected
Needless to say, from the third quarter onwards, due to the two pressures of macroeconomics and supervision, in addition to the platforms that are still in the early stage of commercialization, the advertising revenue of other mature platforms will be very ugly, which is basically within market expectations.
In the fourth quarter, iQiyi's advertising revenue was 1.67 billion yuan, down 10% year-on-year, which was better than market expectations, but there was nothing to look forward to in the short term. In addition to the overall advertising headwind period, iQiyi itself also has resistance. iQIYI advertising includes in-app advertising, as well as sponsored advertising revenue related to film and television variety shows.
On the one hand, App advertising is subject to the supervision period of the Ministry of Industry and Information Technology, and on the other hand, iQiyi's filling rate is already relatively high. And the sponsorship of advertising is to follow the content, this year's iQiyi scheduling plan, in addition to the "Human World" in the first quarter of the broadcast has been a fire, Dolphin Jun believes that the relatively worth looking forward to the big drama is not much at present, here is a simple list of some:
1) Variety show "Detective Detective Season 2", "Music Nightlife" (Huang Lei, etc.), "The Man Who Does Housework 4", etc
2) TV series "Heart Residence", "Wind Rises longxi", etc
3) More than 20 iQIYI original movies.