In the fourth quarter of last year, iQIYI's total revenue was 7.4 billion yuan, unchanged from 2020; net loss was 1.8 billion yuan, an increase of 20% year-on-year
Dong Lin, a researcher at Investment Times
iQIYI Limited (hereinafter referred to as iQIYI, IQ. O) The new year's blockbuster drama "The World of Man", which was broadcast exclusively on the whole network and co-produced, came to an end on March 1. During the same period, the company announced its unaudited financial results for the fourth quarter and full year of 2021.
According to the data, in 2021, iQIYI's total revenue reached 30.6 billion yuan (the same below), an increase of 3% year-on-year, and the net loss narrowed from 7 billion yuan in 2020 to 6.2 billion yuan, a year-on-year narrowing of 11.43%; of which the fourth quarter revenue was 7.4 billion yuan, basically the same as in 2020; the net loss was 1.8 billion yuan, an increase of 20% over the same period last year.
In terms of operating losses, the company's operating loss based on non-GAAP financial indicators (non-GAAP) was 3 billion yuan, and the operating loss ratio narrowed to 10% compared with 15% in the same period last year; of which the fourth quarter non-GAAP operating loss was 520 million yuan, and the operating loss ratio narrowed to 7% from 13% in the same period last year.
It can be seen that since its establishment, iQIYI has not been able to get rid of the loss dilemma. In 2021, the company launched a series of cost reduction and efficiency improvement measures, including focusing on the main business to reduce operating costs, content costs, and organizational structure optimization. After rectification, iQIYI's operating losses have narrowed significantly, which has also added confidence to the company's realization of a turnaround.
At the performance exchange meeting, Gong Yu, founder and CEO of the company, said that China's long video industry has entered a new stage, characterized by the pursuit of efficiency, the pursuit of loss reduction, and the ultimate pursuit of profitability, and the focus has changed from seizing market share to improving operational efficiency. At the same time, Gong Yu also said that iQIYI will achieve breakeven at the operational level of non-GAAP (non-US Gaap financial indicators) for the whole year of 2022, and achieve quarterly non-GAAP operational level breakeven as soon as possible.
In addition, iQiyi's unsustainable cash flow problems have also been alleviated. On March 4, the company announced the signing of subscription agreements with investment institutions such as Baidu. The investors agreed to purchase a total of 164,705,900 newly issued Class B ordinary shares and 304,705,900 newly issued Class A common shares in private placements for a total purchase price of US$285 million (approximately RMB1.8 billion) in cash. Among them, as the largest shareholder of iQIYI, Baidu will subscribe for Class B ordinary shares, and other investors will subscribe for Class A common shares.
With the cash support of Baidu, can iQiyi, which gives up burning money for scale and turning to reduce losses and profits, completely get out of the loss dilemma? While reducing operating costs and content costs, how to make the main business that is almost stagnant continue to grow? iQIYI's future path is to go and see.
iQIYI's main accounting data for the fourth quarter and full year of 2021 (unit: 1,000 yuan)
Source: Company earnings
The narrowing of losses depends on cost reduction and efficiency increase
According to the financial report, in the whole year of 2021, iQIYI's total revenue was 30.6 billion yuan, an increase of 3% year-on-year. Among them, membership service revenue was 16.7 billion yuan, an increase of 1% year-on-year; online advertising service revenue was 7.1 billion yuan, an increase of 4% year-on-year; and content distribution revenue was 2.9 billion yuan, an increase of 7% year-on-year.
At the same time, the company's net loss narrowed from 7 billion yuan in 2020 to 6.2 billion yuan, a year-on-year narrowing of 11.43%; operating loss also narrowed from 6 billion yuan in 2020 to 4.5 billion yuan, and under non-GAAP, operating loss fell from 4.5 billion yuan in 2020 to 3 billion yuan.
In the fourth quarter of last year, iQIYI non-GAAP operating loss of 520 million yuan, down 45% year-on-year, down 52% month-on-month, operating loss ratio narrowed significantly from 13% in the same period last year to 7%, achieving a significant reduction in losses.
The Researchers of Investment Times noted that the narrowing of losses was due to iQIYI's effective cost control and improvement of operational efficiency.
On the one hand, iQiyi has increased its control over the cost of content. According to Q4 2021, iQIYI's content cost was 4.9 billion yuan, down 66% of revenue, down 5% from the same period in 2020 and 8% month-on-month; the annual content cost in 2021 was 20.7 billion yuan, down 1% from 2020.
On the other hand, the company has optimized its organizational structure. In December 2021, iQIYI reported large-scale layoffs, with a layoff ratio of 20%-40%, involving games, short videos, iQIYI intelligence and other businesses, and the middle and high-level executives were also laid off. The financial report also reflects from the side that in the fourth quarter of 2021, iQIYI's sales, general affairs and administrative expenses were 1.1 billion yuan, down 17% year-on-year.
In this regard, some analysts in the industry believe that in the short term, iQiyi's approach does reduce costs, but the substantial reduction of personnel also means the contraction of business volume, in addition, the streamlining of the content department also means that content procurement and creation will be more likely to fall into bottlenecks, and the trial and error rate will increase significantly.
It is worth noting that in the fourth quarter of last year, iQiyi's total revenue was 7.4 billion yuan, unchanged from 2020; the net loss was 1.8 billion yuan, an increase of 20% over the same period last year.
Revenue slowed and membership declined
The researchers of the Investment Times noted that iQiyi's main business has grown less in recent years. For the whole of 2021, the company achieved total revenue of 30.6 billion yuan, an increase of only 3% year-on-year; stretching the timeline, from 2016 to 2020, its revenue growth rate was 111%, 55%, 44%, 16% and 2% respectively.
In terms of revenue structure, iQIYI's operating income is composed of four major parts: membership services, online advertising, content distribution and others. Among them, membership service revenue accounts for more than 50% of total revenue, which is the company's largest source of income.
Specifically, in the fourth quarter of 2021, iQiyi achieved revenue of 7.4 billion yuan, down nearly 1% from 2020. Among them, membership service revenue was 4.1 billion yuan, an increase of 7% year-on-year; online advertising service revenue was 1.7 billion yuan, down 10% year-on-year; content distribution revenue was 762 million yuan, down 5% year-on-year; other revenue was 842 million yuan, down 12% year-on-year.
For iQiyi, advertising has long been unable to cover the large costs it spends on content. Therefore, in recent years, iQIYI has focused on membership payment.
On December 15 last year, iQIYI raised the price of gold VIP ordinary monthly subscription members from 25 yuan to 30 yuan, an increase of 20%; continuous monthly members from 19 yuan to 22 yuan, an increase of 16%; ordinary season card members from 68 yuan to 78 yuan, an increase of 15%; continuous package season 58 yuan to 63 yuan, an increase of 9%; ordinary and consecutive annual card membership prices remained unchanged, 248 yuan and 218 yuan, respectively. This is iQIYI's second price increase after adjusting the price of the Gold VIP membership service in November 2020, with only a gap of about a year in between.
As for the reasons for raising the membership price, iQIYI said: "The subscription price of the video platform has been low, and this phenomenon has affected the healthy development of the industry. In order to establish a more benign industrial ecology, let excellent content producers have a return, and ultimately provide members with more and better content, we decided to adjust the price of members. ”
In fact, iQiyi is no longer pursuing new users, but has begun to make money from existing users. The growth in revenue from the company's membership services business was primarily driven by growth in its monthly average single member revenue (ARM). In the fourth quarter of 2021, iQIYI ARM was 14.16 yuan, an increase of 14% year-on-year and 4% sequentially. Over the same period, the company's average subscriber size has continued to decline, with subscriber numbers having shrunk to 97 million, a difference of more than 20 million from a peak of 118.9 million in the first quarter of 2020.
For the long video industry, the core has always been content and users. Produced by iQIYI and broadcast exclusively on the whole network, "The World of People" fully reflects that high-quality content is the fundamental reason for continuing to attract and retain users. At present, "narrowing losses" is a signal issued by the video platform collectively, indicating that the entire industry will enter the next stage. However, in the face of the challenges of the short video industry, focusing on content quality and exerting IP value may be a long-term solution to establish a moat in the long video industry.
iQIYI's main business revenue for the fourth quarter and full year of 2021 (1,000 yuan)