Image source: Visual China
After the largest layoffs in history and the controversial second price increase for subscription members, on March 1, iQIYI disclosed its unaudited financial results for the fourth quarter and full year ended December 31, 2021.
According to the financial report, in the fourth quarter of 2021, Aiqi's total revenue was 7.4 billion yuan (about 1.2 billion US dollars), unchanged year-on-year. Net loss attributable to iQiyi was 1.8 billion yuan (US$278.7 million), compared to a net loss of 1.5 billion yuan in the year-ago quarter. Non-GAAP net loss attributable to iQiyi was $1 billion ($157.2 million), compared to a net loss of $1.2 billion in the year-ago quarter.
In 2021, iQIYI's total revenue was 30.6 billion yuan (about $4.8 billion), up 3% from 2020. Net loss attributable to iQIYI was 6.2 billion yuan (US$968.1 million), compared to a net loss of 7 billion yuan in 2020. Non-GAAP net loss attributable to iQIYI was 4.5 billion yuan ($704.1 million), compared to a net loss of 5.4 billion yuan in 2020.
The capital market has given quite positive feedback on iQIYI's performance. After the earnings report, iQiyi's stock price soared, rising as much as 39.4% during the session. On March 2, Beijing time, the US stock market closed, iQiyi closed up 21.50%, quoted at $5.03 per share, and the current total market value is $3.97 billion.
After the second price increase, the size of VIP members declined year-on-year
In the fourth quarter of 2021, iQIYI's revenue reached 7.4 billion yuan. From the perspective of various business segments:
Membership services revenue increased by 7% year-on-year to RMB4.1 billion, mainly due to the increase in average monthly single member revenue (ARM);
Online advertising services revenue of $1.7 billion decreased by 10% from the same period in 2020, mainly due to delays in content scheduling during the quarter and challenges in the macroeconomic environment;
Content distribution revenue was RMB760 million, down 5% year-on-year;
Other revenue of $840 million decreased 12% year-on-year, primarily due to weak performance across business lines.
For the full year, in 2021, iQIYI's total revenue reached 30.6 billion yuan ($4.8 billion), an increase of 3% year-on-year. thereinto:
Membership services revenue was $16.7 billion ($2.6 billion), up 1% year-over-year.
Online advertising services revenue of $7.1 billion ($1.1 billion), up 4% year-over-year;
Content distribution revenue was $2.9 billion ($448.1 million), up 7% year-over-year;
Other revenue was $3.9 billion ($614.9 million), an increase of 5% year-over-year.
iQIYI's core financial results for the fourth quarter of 2021 and the full year 2021
It is worth noting that in the fourth quarter, iQIYI's subscription membership declined year-on-year and quarter-on-quarter. According to the financial report, iQIYI's average daily total number of subscribers was 97 million, compared with 102.7 million in the same period last year and 104.7 million in the third quarter of 2021.
This did not come as a surprise to the market, as iQiyi announced a VIP membership price increase this quarter. iQIYI issued a notice on December 15 last year that from 00:00 on December 16, Gold VIP ordinary monthly members were raised from 25 yuan to 30 yuan, continuous monthly subscriptions were raised from 19 yuan to 22 yuan, ordinary season card members were raised from 68 yuan to 78 yuan, and continuous season 58 to 63, and the price of ordinary and consecutive annual card members remained unchanged.
This is also the second time since iQIYI's establishment that it has announced a membership price increase, only about a year after the last time it announced a price increase (November 2021).
Of course, it also benefited from the price increase, although the number of members fell in the fourth quarter, but the overall revenue of the business segment increased by 7% year-on-year. According to the financial report, ARM was 14.16 yuan in the fourth quarter, an increase of 14% year-on-year and a 4% increase from the previous quarter.
However, for the decline in the size of members in the fourth quarter, in the conference call after the release of the earnings report, Gong Yu, founder and CEO of iQIYI, explained that the uncertainty of content launch is the biggest negative factor, mainly caused by the epidemic, its own production, and content review.
Another negative factor is that it comes from mobile. The total length of the long video market is declining, which has become an objective reality and has been going on for some time.
But there is also an element of optimism. Gong Yu believes that the rigid demand for film and television dramas by users, especially for diversified and high-quality film and television dramas, is more exuberant, that is to say, the market for Chinese film and television dramas has gradually become more mature, which is a good thing for iQiyi and one of the positive factors.
The second is the rapid growth of the large-screen market, especially the TV screen, which also includes tablet computers, car networking and screens in smart homes. Gong Yu believes that the biggest application of these terminals is video-related, and the biggest application of mobile phones is definitely communication. At the same time, the rapid growth of the big screen has a particularly positive effect on the addition of iQiyi's membership and the increase of ARPU value (average revenue per user).
The third is the increased awareness of copyright protection. Gong Yu said that although there are still problems with copyright protection, such as online piracy, the situation is much better than in previous years, which has created a very favorable content charging environment for iQiyi.
Therefore, next, the core strategy of iQIYI's membership business mainly focuses on three directions: increasing the average single member revenue, that is, ARM; improving the retention rate of paid members; and continuing to promote new activities.
At the content level, in the fourth quarter of this year, the second season of iQIYI's highly anticipated "Mist Theater" was launched. Although the second season of "Mist Theater" is not as good as the first season in terms of word of mouth, iQiyi said that in the fourth quarter, a number of dramas were launched, of which "Who is the Murderer" became the largest member income of the theater, and the overall advertising revenue of "Mist Theater" doubled compared with 2020.
In the outside world, we are more concerned about iQIYI's new growth point - overseas markets. iQIYI disclosed that its overseas business has achieved substantial year-on-year growth in terms of user scale and revenue, and iQIYI's overseas influence has continued to increase.
In 2021, the average number of daily active users (DAUs) of iQIYI International edition reached three times that of the previous year. Thailand became the fastest growing market, growing by nearly 700% and over 100% in countries and regions such as the United States, South Korea, Australia and Southeast Asia.
In terms of revenue, the international version of membership services and advertising revenue achieved quarter-on-quarter and year-on-year growth in the fourth quarter and the whole year. In 2022, with iQIYI's expansion of cooperation with local partners and the launch of overseas advertising platforms, the monetization ability of the international version will be further enhanced.
The sinking market is another important growth pole that Gong Yu believes is iQiyi. According to the financial report, iQIYI Express Edition launched in early 2021 peaked at 5 million DAU in the fourth quarter.
iQIYI said that due to the low overlap rate between iQIYI Express users and iQIYI APP users, it has helped the company's business penetrate more widely into third- and fourth-tier cities. The iQIYI Express Edition and iQIYI Interest Community have also led to an increase in the consumption time of the content of the film library. The annual user consumption time accounts for 17% of the total time spent on the whole platform.
The core KPIs for 2022 have been set: breakeven as soon as possible
There are views in the market that the reason why iQiyi's stock price rose sharply after the release of this earnings report is because the management finally gave a profit schedule.
When the last quarterly earnings report was released, titanium media APP analysis believed that the current market investment and valuation logic for Chinese stocks has changed, and investors' patience and tolerance for the loss of video websites is also declining.
iQIYI's management is also aware of this problem.
Gong Yu said in this quarter's financial report that from the fourth quarter of 2021, iQIYI launched a series of measures to optimize the organizational structure and focus on core business, significantly improving operational efficiency and return on investment, significantly reducing losses while maintaining the leading position in the industry, and is expected to further reduce losses in the first quarter of 2022 and achieve break-even at the operational level of non-GAAP as soon as possible throughout the year.
According to the financial report, in the fourth quarter, iQiyi's revenue cost fell by 4% year-on-year, of which the content cost was 4.9 billion yuan, down 5% year-on-year. Sales, operating and administrative expenses also decreased 17% year-on-year during the same period, driving iQIYI's non-GAAP operating loss in the fourth quarter to decline by 45% year-on-year and 52% sequentially. For the full year 2021, the non-GAAP operational level loss ratio was 10%, the lowest point in three years.
"In the next first quarter of 2022, we expect the Company's GAAP and non-GAAP operating losses to improve further significantly compared to the fourth quarter of 2021." Wang Jun, chief financial officer of iQiyi, said.
In order to further narrow the loss, Gong Yu said that under the premise of maintaining a reasonable market share of revenue share and user-side traffic, iQiyi will work hard from the following three aspects:
First, optimize the organizational structure and save costs and expenses related to people. Gong Yu believes that in addition to reducing costs, the optimization of organizational structure will also improve efficiency and make organizational structure flatter, which is one of the most important measures.
Second, the biggest cost is in terms of content, so we will make refined selection and operation in content production, content procurement and content operation. The head content will not be reduced, but iQiyi will strive to make the head content more profitable through publicity. On the other hand, iQIYI will more strictly control the content that does not work well, reduce procurement, improve the level of content production, and reduce the output of "bad content".
Third, strengthen the operation and promotion of content-related film library content and long-tail content. Gong Yu hopes that they will play a greater value, generate more advertising inventory, or generate more membership revenue.
Finally, through technical means, we will improve the industrialization of film and television production, improve efficiency and reduce costs, and also improve the predictability of the future broadcast effect of the project.
From the perspective of financial corner love, Wang Jun said that iQiyi's costs and expenses have dropped sharply in the fourth quarter, and losses have narrowed. In addition, on the issue of iQIYI's financial profitability schedule, Wang Jun said that the goal is to achieve the profitability of non-GAAP operations for the whole year and the profitability of non-GAAP operations in a single quarter as soon as possible.
Wang Jun, iQIYI's newly appointed chief financial officer on January 25 this year, can also be seen in the management's determination to change financial performance. For the new CFO, "as soon as possible" is a key word in achieving current goals.
At the same time, Gong Yu also disclosed to investors a changing trend and new consensus in the video industry. He said, "We hope shareholders can notice that iQiyi has taken the lead in opening a new stage in China's long video industry." Market competition has changed from simply pursuing quantity to focusing on quality, and the focus of operation has changed from seizing market share to improving operational efficiency, which has become the consensus of industry leaders including iQIYI. ”
That is to say, the competition for market size and market share is no longer the priority of the current video platform company's strategic sense, after all, from past experience, the situation of this market is that after years of struggle, the echelon of long video giants has not undergone obvious changes, and there is no winner in the absolute sense.
At present, to some extent, it can also be understood that this is also a risk-averse decision made by Internet companies under the weight of "anti-monopoly" at the regulatory level. Because once a company occupies an absolute and unshakable advantage in the market scale, it will inevitably be regarded as a "monopoly".
For the current policy trend at the regulatory level, Gong Yu said that the policies introduced last year are currently in the process of stable implementation, and iQiyi has a deeper understanding of the policies introduced by the government and the changes involved in the new rules of the industry. Therefore, predictability has been strengthened in the process of content moderation, that is, iQiyi has more certainty about the scheduling of content. This certainty is a very positive factor for membership growth and for advertising revenue.
Of course, in addition to regulatory, policy and other factors, from the perspective of industry development, no longer extensive pursuit of market scale, and further intensive cultivation of content ecology, is conducive to reducing the uncontrolled flooding of inferior videos in the market, can maintain the healthy development of the industry ecology.
But I don't know if this also means that the years-long battle for long video giants is coming to an end in 2022, and what forced them to declare a ceasefire is more of a heavy pressure from outside the industry.
(This article was first published on titanium media APP, author | Li Chengcheng)