Long video players decide to make money together

Image source @ Visual China

Wen 丨 Lu Jiu Finance

Happy companies are often all similar, but unfortunate companies have their own misfortunes, and long video players, that's it.

For a decade, long-term video players who have been silent about profits have finally opened up the trick in the matter of making money.

With the financial reports of Ali (Youku), iQiyi, and Station B, each of them has clearly expressed their attitude to give priority to the problem of revenue health in the coming period.

Station B: The medium-term goal is to achieve breakeven by 2024.

Youku: Continued to improve operational efficiency, narrowing the year-on-year loss in the quarter.

Winter is approaching, how to survive, may be more valuable than dreams.

Short- and long-term effects after layoffs

When a company is up, it needs two-wheel drive, but when an industry is down, there are often two-wheel drive, and the long video industry is both so, after the policy continues to pay attention to the rice circle and the Internet, the long video ushered in the worst external environment in history.

As a result, after the big layoffs of iQiyi, long-form video players have fallen into deep thinking, and this quarter's financial report, everyone has begun to pay attention to losses.

On December 1, 2021, iQiyi was hit by a large number of layoffs, with a layoff ratio of about 20% to 40%.

According to the financial report, in fiscal 2021, iQIYI's net loss attributable to the parent company was 6.17 billion yuan; compared with the net loss attributable to the parent company of 7.04 billion yuan in 2020, it was 870 million yuan less, and the profitability increased by 12.4% year-on-year.

How does Capital respond to the transcripts after the layoffs?

The day after the earnings call, iQiyi, which was listed on the U.S. stock market, rose 21.5 percent, creating the biggest one-day gain in the latest year, with a $500 million increase in market value.

After the layoffs, the stock price rose and the losses decreased, and the effect seemed to be immediate.

But there are two points worth paying attention to, one is short-term effects, and the other is long-term sequelae.

Layoffs can solve a rapid improvement in revenue data in the short term.

On the basis of more than ten years of content accumulation in the field of long video, several domestic veteran parent video companies basically have their own content basic disk, even if they do not produce content increments, they can also meet the basic needs of some users.

In essence, this is a dividend accumulated over a decade, but how long this dividend can last will be a serious question.

The second question arises, whether the business left behind after the layoffs can meet the need to continue to generate new content.

After ten years of education in the market, the current price of the copyright market has been very outrageous, homogenization is also very serious, and it is impossible to open up the gap with competitors through third-party works; industry insiders told Lu Jiu Finance that the current major video platforms have been very cautious about purchasing dramas. Judging from the HBO and Netflix success stories in the US market, self-made dramas will be the only hope for long-form video sites.

Then, after a large number of layoffs, whether to retain a stable and creative video creation team will be a major challenge for enterprises.

B station in the conference call after the financial report, clearly made a statement, before the B station user growth and revenue growth weight is seven three open, and in the future, this proportion will become five or five open.

In addition to achieving the goal of 400 million monthly active users in 2023, Station B also gave a clear break-even target. CFO Fan Xin said that Station B will achieve a year-on-year narrowing of the annual Non-GAAP operating loss ratio in 2022, and the medium-term goal is to achieve Non-GAAP breakeven in 2024.

Youku, which rarely promotes itself after Ali's financial report, also finds a number of media for business interpretation after Ali's financial report, and the most message conveyed is that the loss is narrowing.

Alibaba's financial report attributed Youku's narrowing losses to efficient investment and production of high-quality content and the improvement of operational efficiency.

And Youku's external caliber is also relatively unified, the details of the data are not public, but a lot of emphasis on their continuous investment in content, whether it is film and television dramas or variety shows, have given a long list, but unfortunately, backed by the Ali tree of Youku, so far has not produced any explosive products that can be comparable to "Game of Thrones" or "Westworld".

Tencent has not yet released the financial report, but from the Tencent financial report in the Q4 quarter of 2020, it can be seen that the problems currently facing Tencent Video are very obvious, the user growth is slow or even no longer growing, the loss is still continuing, perhaps the fate of Tencent Video is similar to Youku's existence, but the tree behind it is more in line with its temperament, which can give it ecological supplements.

The road to profitability is different

Unfortunate players have their own misfortunes.

First look at Station B, after all, it is a gathering place for young people at the moment.

Why is the B station of the medium- and long-term video company with community attributes more favored by the market and capital? Because of the B station's own community model, you can launch the UP master to produce a large amount of content to meet the needs of content iteration, from the perspective of product form, B station is more like the vibrato in the field of medium and long-term video, which is the ability that iQiyi, Youku and Tencent Video do not have.

However, this is also a problem that limits the revenue of station B, in the communication between Lu Jiu Finance and a number of insiders of station B, it is learned that in the ecosystem of station B, the up master is the most important link, and even Chen Rui will not easily offend the big UP master of station B.

In the fourth quarter of 2021, the operating cost of Station B was RMB4,683.0 million, an increase of 62% year-on-year, and the revenue sharing cost was an important part of the operating cost, which was RMB2,428.5 million, an increase of 91% year-on-year.

By 2021, more than 70% of the million fan UP owners of Station B are also live broadcasters. More than 600,000 content creators earn revenue through live streaming throughout the year.

From this point of view, as a content platform company, Station B has found its own revenue "elastic pants", and after the competition is less intense, this sharing link will become the revenue regulator of Station B.

Look at Tencent Video and Youku, which are backed by giants.

Tencent Video is obviously an indispensable link in Tencent's entire content media ecology, and it is also the best card type among all long video players at present, the upstream Reading Group can provide high-quality film and television scripts for it, and the downstream has Tencent's QQ, WeChat and other high-quality traffic entrances.

Youku has formed an Alibaba large cultural and entertainment group through a series of acquisitions by Ali, and has its own small ecology, in addition to the stable advertising investment of Ali e-commerce, it is said that it is not worried about revenue.

But why are Tencent Video and Youku still unable to form a profit? Essentially, there are two reasons, which are also common to the industry.

First of all, it is the strong industry impact of short video, which is already a well-known fact, short video monthly active has already entered the 900 million era, and long video play for more than ten years, still stuck in the 500 million stage, the daily online time is more than 10 times the gap.

Secondly, is the problem of willingness to pay, long video in the other side of the ocean peers, membership income has been a considerable source of income, but in the country, this income has not been able to break out, piracy and low willingness to pay has been plaguing the development of the industry, perhaps users are willing to pay for "Game of Thrones", but the domestic long video players can not provide similar products, that is, the contradiction between supply and demand, the user's needs have long been in line with international standards, but the product is delayed.

Finally, look at the current situation of iQiyi.

What is the concept of $474 million? The production cost of the first season of the "Lord of the Rings" TV series is as high as 465 million US dollars, that is to say, iQiyi's remaining money is only enough to make a large-scale TV series.

However, Baidu still helped in a pinch, and on the evening of March 4, the news came out: iQiyi launched a fundraising of 285 million US dollars, and Baidu participated.

In summary, B station wants to make a profit, the potential road, is to monopolize the UP master, and then self-regulate the share; Tencent and Youku, there is a lot of money to invest, if you can really do a good job of content, it may be a ride, which Tencent wins more than Youku; iQiyi's layoffs are like opium, short-term pain, but long-term want to turn over, in addition to content, there is no other choice, but the content needs to burn money, where does the money come from?

What product to save you?

The long video peers on the other side of the ocean have obviously found their own flywheel.

Big investment, bet on big production, revenue increased significantly, returned funds, continued to invest big, bet on big production, this cycle has begun.

Only continuous output of high-quality products is the only way out for the long video industry.

On September 17, 2021, Netflix's "Squid Game" was launched, and in just half a month, it won the title of series popularity in more than 190 countries and regions covered by Netflix.

Relying on sophisticated production, Netflix, a rising star in the video industry, has gradually led the development of the industry. Throughout 2021, 6 of the top 10 most searched TV series worldwide are from Netflix.

Excellent content that brings eye-catching profits. According to the financial report, in fiscal 2021, Netflix achieved operating income of $29.7 billion, an increase of 18.81% year-on-year; net profit of $5.12 billion, an increase of 85.28% year-on-year.

The $6 billion in cash on Netflix's account at this time has also made its domestic counterparts lose their jaws in envy.

In addition to Netflix, there are many excellent long-form video companies in the industry that have made great works.

As another parent video company in the United States, HBO's series such as "The Sopranos", "Sex and the City" and "Game of Thrones" have been warmly welcomed in the American television industry.

But the question is, why can't domestic long-form video players make the above explosive works?

At present, there are three reasons.

The first is that the money was burned in the copyright war in the early days.

The earliest long video platform in China has experienced a tragic copyright war, almost all players have used their cash reserves to buy third-party copyrights, and even once appeared a sky-high exclusive copyright, in this process, some players who do not have enough financial resources have directly fallen into the flow of players.

That is, spending money early on where it shouldn't be.

Moreover, it has also sent itself to the next step, and the subsequent annual film, TV series, and variety show copyrights must continue to be purchased, and one of the biggest ironies is that Mango Super Media, as an upstream supplier, has made a profit of 2.1 billion yuan in 2021.

Therefore, Youku said that it was time to focus on the content and finally woke up.

The second is the shackles of platform thinking.

The early copyright war has already reflected the platform thinking of domestic long video players, and everyone has not seen the root cause of the problem early, that is to say, the moat of the long video industry lies in its own production of fine products, rather than buying back fine products; this long-term platform thinking determines that long-term video players are difficult to focus on the production of high-quality content, when invested, do not dare to all in, the content produced, that is, it is difficult to produce explosive products.

Not only that, this cost-controlling production method also put high-quality IP such as "Ghost Blowing Lights", "Tomb Robber Notes", "Breaking the Sky" and so on, and the scolding was made, the money was spent, and the IP was destroyed.

Finally, short-term profits are plagued.

When the money has been spent, there is no ability to bet on large productions, the long video platform began to find another way, focusing on variety shows, trying to use the influence of stars to attract money in disguise, originally this road was a good short-term revenue road, but unfortunately, it was quickly recognized by the relevant departments, and it has not been possible since.

The desire for short-term profits has caused players to fail to see long-term value.

However, the dying may see everything clearly in retrospect, but who can inject new hope into this dying industry? Is it Tencent? Or Ali?

When will we be able to produce a big-budget series that is truly internationally integrated?