Since last year, iQiyi has been on the hot search many times due to the news of layoffs.
Behind this, everything has traces. According to the data released by iQIYI on March 1, in 2021, the growth rate of iQIYI's most important membership service business revenue declined, and the company's capital situation also appeared unprecedentedly tense, and at the end of 2021, the company generated a funding gap of 1.1 billion yuan.
The difficulties have already been revealed. In November last year, Gong Yu, founder and CEO of iQIYI, said on an analyst conference call that the focus for iQIYI was open source and throttling.
As the first ministerial video platform, iQiyi has also been in the limelight for a while, although it has been losing money, but it is still favored by capital. In just a few years, why has iQIYI lived a "tight life"?
01, this time really lack of money
Since the birth of video platforms, profitability has been the most realistic dilemma in front of them, and iQiyi is no exception. Since its establishment in 2010, iQiyi has lost money year after year. From 2015 to 2021, between 7 years, the company's cumulative net loss is about 42 billion yuan.
A company that does not make money can survive for more than 10 years and become the head of the industry, relying on the money of investors.
Before iQIYI's listing, it had made three financings, with a total financing amount of about US$1.88 billion, and well-known companies and investment institutions such as Baidu, Xiaomi, Shunwei Capital, Hillhouse, and Redshirt Capital had invested.
According to the Tianyancha APP and company announcements, iQIYI has raised about US$7.2 billion since 2010, converted into nearly RMB 50 billion.
Capital is optimistic about iQiyi because it is optimistic about the entire video platform track behind it, and they believe that "vigorous miracles", as long as they are willing to spend money, they will be able to grow rapidly, thus forming a scale and winning the market.
In the past few years, iQiyi's growth has indeed been very fast, which can also give investors confidence. From 2015 to 2019, iQIYI's revenue grew from 5.3 billion yuan to 29 billion yuan, with an average annual compound growth rate of 53%.
But from 2020 onwards, iQiyi's revenue growth rate has fallen from the previous double digits to about 3%.
In terms of business, iQIYI's most important businesses are: membership services, online advertising and content distribution. Before 2018, online advertising was iQiyi's largest business, but after that, due to the impact of short video platforms and other reasons, revenue began to decline.
In recent years, with the growth of paid dramas, the membership service business has gradually grown into iQIYI's largest business, accounting for about 55% in 2021.
Although the membership service business is still growing, the growth rate has declined sharply. In 2021, the revenue of this part of the business increased by only 1.4 percentage points year-on-year. Behind this is the bottleneck in the number of iQIYI members, and in 2019, the number of iQIYI members increased by 19.6 million year-on-year to 105.7 million. In 2020, its membership not only did not increase, but also lost 5 million.
Once a company that is not profitable stops growing rapidly, its attractiveness to capital is likely to decline.
In 2021, capital began to "snub" iQiyi. Previously, financing activities could provide iQiyi with a large net cash inflow, such as 9.37 billion yuan in 2020. In 2021, this value is -2.96 billion yuan.
Affected by this, iQiyi began to have a tight financial situation. As of the end of 2021, its cash and equivalents decreased by $7.87 billion from the beginning of the year, the first negative growth in four years. The monetary funds on the company's account are about 3 billion yuan, and the interest-bearing liabilities due within one year are about 4.1 billion yuan, resulting in a funding gap of 1.1 billion yuan, which is also the first time that iQiyi has had a funding gap since 2015.
In the long run, iQiyi's asset-liability ratio is also rising year by year, from 60% at the end of 2018 to 87% at the end of 2021.
Lack of money has become iQiyi's biggest problem at present, and it is still Baidu that helps it this time. On March 4, iQiyi announced that it had once again secured $285 million in financing from Baidu and others, or about 1.8 billion yuan.
Although financing has solved the urgent need, in the long run, if iQiyi cannot make a profit, it will still face greater financial pressure.
02, income hit a wall
In fact, in addition to iQiyi, Youku and Tencent Video are also in the red. In the 10 years since 2010, led by three video websites, the video platform has burned more than 100 billion yuan. Although the money was burned, the problem of profitability could never be solved.
In stark contrast, there is Netflix, who always loves to compare himself. In fiscal 2021, Netflix had revenue of $29.698 billion and net profit of $5.116 billion. From an online DVD and Blu-ray rental provider to a membership-based streaming platform, Netflix has been quite successful.
Why none of the three video sites have been profitable is probably something in common.
In contrast, Netflix's profit model is to obtain membership revenue by continuously outputting high-quality content and expanding the scale of subscription membership. Video platforms such as iQiyi are biased towards Internet thinking, that is, first attract users through free content, make a large traffic pool, and then earn users' money through some ways, such as later membership subscriptions, advanced on-demand, etc.
The difference is that Netflix first cultivates the user's payment habits, as long as it provides good content later; iQiyi, etc. is to cultivate the user's payment habits after spending a lot of money to buy traffic, which invisibly improves the user's expectations.
Therefore, the profit model of video websites was once "wool out of the dog, pigs to pay.". From the perspective of iQIYI's revenue sources, before the third quarter of 2018, iQIYI's main source of income was advertising.
It is said that Gong Yu had issued kPIs to the team to develop paid memberships in the early days of entrepreneurship, but unfortunately the time was not ripe, until 2015, "Notes from the Tomb Robber" starring Li Yifeng and Yang Yang promoted this form, and then became popular on major video websites.
As for the reason, in addition to the huge fan base of the actors, the series itself is also indispensable. This also provides a way for the platform to make money, and actors + IP with their own traffic have become the standard. THE IP adaptation has changed from "raised in the deep boudoir people do not know" to "a thousand trees and pear blossoms", with "Old Nine Doors", "Splendid Weiyang", "Chu Qiao Biography" and other dramas.
Since the third quarter of 2018, membership service revenue has completely prevailed. iQiyi, which sounded the horn of "the paid model can run through", also ushered in a highlight moment, and the stock price once reached $46 per share.
Also in 2018, iQiyi took the lead in launching the talent show "Idol Trainee", the "First Year of Idols" opened, and Tencent Video followed up with the launch of "Creation 101". At the same time, this has also become a variety show "pillar" of the two major platforms over the years, becoming a replicable standardized product and bringing considerable income to the platform.
It is said that the naming fee alone, these two major variety shows have earned about 3 billion yuan in four years. In terms of membership subscriptions, according to a 2018 report by Aurora Big Data, 43.8% of the viewers of "Creation 101" purchased members of Tencent Video, and 35.5% of the audience of "Idol Trainees" purchased iQiyi members.
Unfortunately, whether it is a film and television drama or a variety show, it cannot be sustainedly attractive, and it is naturally difficult for users to continue to pay for a platform.
(iQIYI CEO Gong Yu and Xiao S)
Although the popularity brought by IP dramas is high, the problem is that users are paying for episodes and actors, not platforms. Ip dramas rely on expensive purchase costs, and if iQiyi does not bid enough to get the drama, users will run to other platforms.
For example, in 2020, iQiyi relied on the popular dramas "The Hidden Corner" and "The Silent Truth" to bring 104.9 million and 104.8 million member subscriptions to its second and third quarters, respectively. IQIYI, which can't wait, proposed a price increase in November, but this quarter failed to come up with a better blockbuster than the first two, and its membership decreased by 3.1 million in the fourth quarter.
In terms of variety shows, in addition to the aesthetic fatigue of the audience caused by the homogenization of content, the "pouring milk" incident that occurred in May 2021 by fans in order to fight the "pouring milk" led to the State Administration of Radio, Film and Television issuing a notice in September that "radio and television institutions and online audio-visual platforms shall not broadcast idol cultivation programs", and the idol selection was completely extinguished.
iQIYI's performance in Q3 of fiscal 2021 declined unsurprisingly, with revenue and net profit growing at -0.25% and -23.79% respectively.
iQiyi, which has hit a wall in open source, can only throttle.
03, the cost remains high
The cost of a video website mainly comes from two aspects, content costs and bandwidth costs. iQIYI's content costs and bandwidth costs in 2020 were 20.9 billion yuan and 2.4 billion yuan, accounting for 75% and 9% respectively.
Copyright fees account for the majority of content costs. Don't underestimate the cost of buying dramas, another domestic video site Mango Super Media can achieve profitability, which has advantages in this regard.
And iQiyi's life is not so good, it has to be with Youku, Tencent Video and other PK at the same time, and the competition is undoubtedly a higher cost. For example, the copyright of "Lonely Fang Doesn't Appreciate Itself" sold for 600 million yuan, "The Twelve Hours of Chang'an" totaled more than 700 million, and "Ruyi Zhuan" was more than 800 million...
(Stills of "Lonely Fang Doesn't Appreciate Yourself", Yang Ying)
From 2015 to 2020, iQIYI's content costs were 3.7 billion yuan, 7.5 billion yuan, 12.6 billion yuan, 21.1 billion yuan, 22.2 billion yuan and 20.9 billion yuan, respectively, and its corresponding revenue accounted for 69%, 67%, 73%, 84%, 77% and 68%, respectively, maintaining about 70% all year round.
In desperation, iQiyi and other video platforms have taken self-made dramas and sub-account dramas as new attempts.
Taking the sub-account drama as an example, iQiyi has been trying since 2015, but the splash is not so big.
The difference between sub-account dramas and copyright dramas is that copyright dramas are content producers who package episodes and sell them to the platform, and as for whether the follow-up click rate is high or low, how much money can be made has nothing to do with it. The account-sharing drama takes the route of "sharing benefits and sharing risks", and the two sides share the money according to a certain proportion.
To some extent, the sub-account drama is that the content producer undertakes a certain risk for the platform party. But the problem is that the head drama is not worried about the market, and is not willing to take this "hard work" route. That is to say, although the ledger model can save a certain cost for the platform, it can still not spend less when the platform should spend money on copyright dramas.
("The Twelve Hours of Chang'an" Celebration Banquet, Lei Jiayin, Re Yiza)
Perhaps, iQiyi once thought that burning money is only a necessary stage in the early stage, and the follow-up can gradually achieve profitability by reducing marginal costs. Unexpectedly, this set of models that can eat in the Internet industry has put it in trouble. From 2015 to 2021, its combined net loss exceeded 42 billion.
The idea of spending money to buy traffic and then digging deep into user value formulated by video websites at the beginning obviously did not work. After all, in the content industry, excellent content is the fundamental, and users who rely on free circles in the early stage can easily be snatched away by other platforms if they cannot continue to provide high-quality content in the follow-up.
In recent years, iQiyi has gained a firm foothold in the video website industry by relying on several self-made dramas, but while it continues to cultivate content, competition from short video platforms such as Douyin and Kuaishou is also happening in a huge way. iQiyi is catching up, and the speed of progress has not been able to catch up with the times.
(Author |.) Hua Yu Qi Minqian, Editor | Liu Xiaoying)