Figure: Figure worm
Source: 21tech
Author: He Hongyuan
Editor: Zhang Weixian
iQiyi is being forced to adjust its pace.
"The goal is to achieve full-year non-GAAP operational profitability and single-quarter non-GAAP operational profitability as soon as possible." Recently, on the earnings call, when talking about the 2022 performance outlook, Wang Jun, CFO of iQiyi, who has recently taken office, said.
This is a rare statement by iQIYI executives on the timing of profitability.
On the same occasion, Gong Yu, founder and CEO of iQIYI, said that the pursuit of profitability has become the current goal, rather than the previous pursuit of market share and rapid growth.
Behind it, iQiyi has essentially come out of a high-growth cycle.
According to the financial report, in the fourth quarter of 2021, iQIYI achieved total revenue of 7.389 billion yuan, down 0.93% year-on-year and 2.64% month-on-month; net loss of 1.776 billion yuan, non-GAAP attributable net loss of 1.002 billion yuan, a year-on-year narrowing of 14.9%, a narrowing of 28.4% quarter-on-quarter.
For the whole year of 2021, iQIYI's total revenue was 30.55 billion yuan, an increase of 3% year-on-year; a net loss of 6.109 billion yuan, compared with a loss of 7.007 billion yuan in the same period last year; and a non-GAAP net loss attributable to the mother of 4.49 billion yuan, a year-on-year narrowing of 17.6%.
In terms of the total number of key daily average subscription members, iQiyi only had 97 million, down 5.6% year-on-year and 7.4% month-on-month, falling below the 100 million mark.
All of the above affects the pace of iQIYI's financing.
For a loss-making company, this is a matter of life and death.
The circle-breaking of "The World of Man" reflects iQiyi's competitiveness in content. Image source: Film poster
Why growth?
It was not easy for iQiyi to achieve a slight increase in revenue last year.
Although the number of members is declining, membership service revenue reached 16.7 billion yuan, an increase of 1% year-on-year.
Behind it, rising membership prices. At the end of 2021, iQIYI announced that it will update the gold VIP membership subscription price.
After the price increase, the gold VIP ordinary monthly subscription members were raised from 25 yuan to 30 yuan, an increase of 20%; the continuous monthly subscription was raised from 19 yuan to 22 yuan, an increase of 16%; the ordinary season card members were raised from 68 yuan to 78 yuan, an increase of 15%; the continuous package season was raised from 58 yuan to 63 yuan, an increase of 9%; the price of ordinary and consecutive annual card members remained unchanged, 248 yuan and 218 yuan respectively. Star Diamond membership prices remained stable.
At the end of 2020, iQIYI has launched a round of membership price increases. Compared with the price before and after the price increase, the iOS side is basically flat, and the membership fee of each file on the Android/PC side increases by about 25%.
Driven by this, in the fourth quarter of 2021, iQIYI's membership revenue was 4.121 billion yuan, an increase of 7.4% year-on-year and a decrease of 3.9% quarter-on-quarter. Monthly ARM for paying users was RMB14.16, up 13.73% year-on-year and up 3.74% month-on-month.
But at the other end, the number of iQiyi members and membership income have come out of the inverse curve, which is not a good sign.
In this regard, Gong Yu believes that the problem lies in the supply of content, not the price increase. He pointed out that the uncertainty of content launch is the biggest negative factor. Another negative factor is mobile, where the total length of the long video market is declining and has been going on for some time.
But market feedback is not necessarily the case.
In the vote on the price increase of iQiyi members made by the official Weibo of 21st Century Business Herald, 647 people chose to be "unacceptable", and a total of 788 people participated in the vote. The weibo was read by 218,000.
A number of cleaning staff working in Beijing said that since the long video charge, they have switched to short videos. They earn 6,000-8,000 yuan per month and bear the pressure of supporting their families. This also confirms Gong Yu's statement that "the total market time has declined".
"Based on national conditions, it is difficult to rely on membership revenue alone. Even Netflix has to rely on the broader international market. A former executive of the head minister video platform explained to the 21st Century Business Herald reporter.
At the other end, iQiyi's online advertising services revenue was 7.1 billion yuan last year, up 4% from 2020. In the fourth quarter, iQIYI's advertising revenue was 1.665 billion yuan, down 10.5% year-on-year.
The market is also full of twists and turns. Affected by the macro environment, head advertisers, including Yili and Mengniu, have revealed a downward trend in marketing delivery, and the same is true for the e-commerce sector. "The budget is tightening." A number of e-commerce marketing departments revealed to the 21st Century Business Herald reporter.
In addition, last year, iQIYI's content distribution revenue was 2.9 billion yuan, an increase of 7% year-on-year. Other revenue increased by 5% year-on-year to CNY 3.9 billion.
In view of the core engine role of membership and advertising revenue, it means that under the adjustment of the environment, iQIYI's revenue growth potential is limited.
This directly affects market valuations.
On March 10, iQiyi closed at $3.21, down 21.71%. Year-to-date, iQiyi has fallen by 29.61%.
This situation greatly increases the difficulty of financing.
Why turn around?
In the end, the major shareholder Baidu took the shot.
On March 4, iQIYI announced the signing of subscription agreements with investment institutions such as Baidu and Oasis Management Company Ltd. The investors agreed to purchase the shares in private for a total purchase price of US$285 million in cash (approximately RMB1.804 billion at the March 11 exchange rate).
But judging by iQiyi's annual loss of nearly 6 billion yuan, this money will not last long. According to the financial report, as of December 31, 2021, its cash, cash equivalents, restricted cash and short-term investments were only 4.4 billion yuan.
Therefore, turning around losses has become an inevitable choice for survival.
Gong Yu said that in order to narrow the loss, iQiyi has taken measures to open source and reduce expenditure. In terms of throttling, the optimization of organizational structure can save some costs and expenses related to people, in addition to reducing costs, it will also improve efficiency and make the organizational structure more flat. Previously, iQiyi carried out a round of large-scale layoffs.
At the same time, in terms of content, iQIYI will make refined choices in content production, procurement and operation.
"The head content will not be reduced, but it is trying to make the head content more profitable through publicity." Stricter control of content that is not well broadcast, reduce procurement, improve the level of content production, and reduce the output of 'bad content'. Gong Yu said.
The third aspect is the content-related film library content, long-tail content, etc., iQIYI will strengthen operational publicity, so that it can exert greater value, generate more advertising inventory, or generate more member income.
In the short, medium and long term, iQIYI's choice is still to improve the industrialization of film and television production, improve efficiency, reduce costs, and improve the predictability of the future broadcast effect of the project through technical means.
Gong Yu also stressed that under the premise of maintaining a reasonable market share of revenue share and user-side traffic, various measures will be taken to reduce the cost and expense.
It is worth noting that iQiyi, which has been losing money, once appeared to be bold in the market.
"The fees are not even approved much, and they are very loosely managed." Some former employees recalled iQiyi in previous years to the 21st Century Business Herald reporter.
In the fourth quarter of 2021, iQIYI's content cost was 4.9 billion yuan, down 5% year-on-year.
On the other hand, in terms of increments, iQiyi is also trying.
According to iQIYI CCO Wang Xiaohui disclosed to the outside world, the advertising and licensing revenue of "Wind Rise Luoyang" performed very well. To a certain extent, the "one fish and twelve eating" model has been realized, and the dimensions of novels, comics, animations, variety shows, games, online movies, documentaries, script killing, and offline live entertainment have all been expanded, resulting in the phenomenon of unaired fire.
He also said that the "Ancient Chinese City Universe" will continue to be developed.
However, "The Wind Rises luoyang", and even the "mist theater" of iQiyi's previous fire, the recent market breakout degree is not as good as expected.
This is directly related to the sustainability of iQIYI's "one fish, more eat" model and even survival itself. In this regard, Wang Xiaohui said, "There is a certain degree of accidentality in creation, and it will be carefully studied."
Looking back, "The World of Man" broke the circle, which also reflected iQiyi's core competitiveness in content.
A well-known director who has won the Feitian Award told the 21st Century Business Herald reporter that Gong Yu will participate in many projects all the time, and even some of them have begun to pay attention from the script.
The market is still moving. To a certain extent, the destination of iQiyi also represents the destination of long video and even the film and television industry.
Editor: Lu Taoran