The author | Pan Xinyi and Song Wanxin
Editor| Zheng Huaizhou
When some media began to appeal for Gong Yu to "Robin Li believe in me again", the image of a sad veteran was thus shaped.
In order to solve the big hole burned by burning money, iQiyi has been entering the survival stage of the broken arm for some time. In fiscal 2021, iQiyi's operating loss ratio narrowed to 10 percent from 15 percent in the same period last year, the lowest point in the past three years.
Gong Yu is no longer implicit, as the founder and CEO of iQiyi, he admitted at a recent earnings report that the loss reduction is because open source throttling has played a role. "In order to reduce the loss, we optimize the organizational structure, save some people-related costs and expenses, while content production, content procurement and content operation to do refined operations, head content will not be reduced, while more strictly control the broadcast of bad content, reduce procurement, reduce the output of 'bad content'."
However, in the face of the challenges of the long video environment and the dilemma of its own model, when the short video platform is surrounded by tigers and wolves, how can the anxious iQiyi save itself? Are these decisions to extinguish the fire or quench their thirst?
01 I can't burn any more money
As early as the end of last year, iQiyi vaguely spread the news of "major layoffs". According to media reports at that time, the layoff ratio was 20%-40%, involving games, short video moments, iQiyi intelligence and other businesses, and the middle and high levels were also laid off, which was regarded as a sign of poor management by the nervous market.
In recent years, the mention of iQIYI has become an inescapable curse, which has also made iQiyi, which once "spent money like dirt" fall to the point of "cutting down on food and clothing" today.
Taking the listing as a watershed, iQiyi's feedback in the primary and secondary markets is completely different. When it was still below the surface, iQiyi was undoubtedly a star company in the limelight; but when it came to examining profitability, the secondary market was impatient and keen to vote with its feet, and as of press time, its market value had fallen from $10.95 billion just listed to $3.236 billion, a drop of about 70%.
Compared with when he went public four years ago, Gong Yu's public statements to the media are no longer casual.
In 2018, Gong Yu was 50 years old, and iQiyi, who wanted to be a "Netflix", finally landed on the NASDAQ this year. When it went public, Gong Yu made a bold statement - "build an online entertainment kingdom in China". In China at the time, targeting Netflix or Youtube was a beautiful promise made by all the long-form video companies lining up to make to investors and the public.
Standing next to Gong Yu and ringing the bell together was Robin Li, Baidu, the largest shareholder of iQiyi. Time is pushed back 8 years, it is Robin Li who selected Gong Yu to run iQiyi.
Gong Yu, who is in his 40s, is also working as COO at Sohu, and the outside world often labels him as "Tsinghua Automatic Control Theory and Applied Engineering Doctor". In an article published on sohu's mother and baby channel, the description of him is that he is dressed casually, young and elegant, personally pouring water on visitors, and the consistent style of doing things is "the goal is set, just walk steadily, do not look at both sides."
Under the tide of Internet entrepreneurship, this description is the usual expression of the media, mostly used in the multi-personality shaping of technical elites. But during the iQiyi period, the aura of technical personality on Gong Yu gradually faded, leaving the public with more of a businessman's side.
After entering iQiyi, Gong Yu almost gained the unconditional trust of Robin Li. He once said publicly in 2018, "There has not been a single discrepancy in the past 8 years, and Robin Li believes that my judgment is in accordance with the rules and in accordance with the spirit of the contract, and I don't remember that there was a serious conflict, but more of a rational analysis and decision-making in business." ”
This trust has not come easily. In the context of several head platforms maliciously bidding for big IP, it is no secret that the burning money of long videos, in fact, iQiyi's content costs have been rising until the past two years. But both Robin Li and Gong Yu underestimated the uncertainty of expanding in the long-form video space, as well as the hardships and costs to be paid.
What's worse is that during the period when Kuaishou and Douyin occupied the mobile phone screen, iQiyi completely missed the "short video" outlet. According to the news of "Delay", at the end of 2021, Ge Hong, senior vice president of iQIYI and head of short video at the moment, has announced that iQIYI will no longer invest money in this department.
The battle for user time begins. Hugging the group accused short videos of becoming the consensus of long video platforms, from the war of words to the lawsuit war, all parent video platforms have expressed dissatisfaction with acts such as erchuang and cutting strips. For example, iQiyi once claimed 30 million yuan from today's headlines for "Yanxi Raiders".
Judging from the number of litigation cases, the number of lawsuits against iQIYI for copyright infringement far exceeds that of various short video platforms. The governance of infringement of user-uploaded content is actually a problem that all platform enterprises have to face, and complaining about infringement on short video platforms is more like throwing the pot. Fundamentally, the demand for long videos cannot be replaced by short videos, and the long-standing profit dilemma is the key.
According to public information, from 2018 to 2020, iQIYI's net loss was about 9.1 billion yuan, 10.3 billion yuan and 7 billion yuan respectively, and the total net loss in the three years was as high as 26.4 billion yuan. From 2015 to 2017 before the listing, its net loss was 2.576 billion yuan, 3.075 billion yuan and 3.738 billion yuan.
Under the action of the epidemic accelerator, the gap of iQiyi has also been observed by the outside world with a magnifying glass. According to the financial report data, iQIYI's asset-liability ratio for the whole year of 2021 has reached 86%, an increase of 4% from the 82% data in the semi-annual report, and its current liabilities and non-current liabilities have reached 36.799 billion yuan.
In the face of losses, iQIYI Gong Yu gave a clear attitude at this quarterly earnings report, "Our goal is to achieve breakeven at the non-GAAP operational level for the whole year of 2022 while maintaining the leading position in the industry, and to achieve the breakeven at the quarterly non-GAAP operational level as soon as possible." ”
02 Make money, get it faster
The cold winter of film and television under the epidemic has dragged down the pace of iQiyi, and cost reduction and efficiency increase have become the key words.
According to public data, in Q4 of fiscal 2021, iQiyi's content cost fell to 4.9 billion, down 5% year-on-year and 8% month-on-month. The cost of content as a share of revenue fell to 66%. The data shows that from 2019 to 2021, the new dramas and variety shows on iQiyi are 333, 309 and 339 respectively, and the number of new dramas is increasing, and the cost of content is decreasing. From 2019 to 2021, iQIYI's content production costs will be 222, 20.8 and 20.7 billion, respectively.
For a long time, iQiyi has bet on variety shows. A producer told 36Kr that in the field of long-term video, compared with film and television dramas, the cost of variety shows is lower, and the way of monetization through sponsorship is also more lucrative and stable.
With the popularity of the "Youth with You" series, iQiyi has become a feast for advertisers. Some insiders revealed that the cost of Nongfu Spring's exclusive title of "Idol Trainee" reached 200 million yuan.
The gift of the fan economy has long been secretly marked with prices. According to media reports, in May last year, iQiyi's talent show "Youth with You" had a "milk pouring incident" and was ordered by the Beijing Municipal Radio and Television Bureau to suspend the recording of follow-up programs. Since then, sponsor Mengniu has issued an apology statement, followed by iQiyi's announcement of rectification measures, stopping recording and live streaming the group night originally scheduled for May 8.
Losing the draft banner has exacerbated the already downward advertising revenue. According to iQIYI's financial report in the third quarter of 2021, the revenue of online advertising services was only 1.7 billion yuan, a total decrease of 10% compared with the same period in 2020.
At the same time, the cancellation of advanced on-demand also gave iQiyi a heavy punch. According to Caijing, an iQiyi source once revealed that advanced on-demand can improve copyright losses by at least 30%.
Although this has seen the light of day for iQiyi, which is struggling to make a profit, advanced on-demand was forced to cancel last October.
After several "open source" failures, iQiyi began to increase membership fees. In December last year, iQIYI's members raised the monthly subscription price from 19 yuan to 22 yuan, and the continuous package price was raised from 58 yuan to 63 yuan, and the Q4 member revenue also increased by 7% to 4.1 billion yuan, accounting for 55% of the overall revenue in the quarter. Some media comments pointed out that the price increase does not seem to have much help to improve iQiyi's financial situation, but on the contrary, it may also affect the growth of the number of subscription members.
As a long video platform, perhaps iQiyi is most criticized by the public for the instability of content quality. In 2021, iQiyi's once proud "Mist Theater" "Octagonal Pavilion Mystery Fog" Douban score was only 5.1 points, and the score of "Fatal Wish" fell to 4.6.
In the final analysis, the quality of self-made dramas is difficult to control.
For a long time, long video platforms have a common problem, that is, the so-called content production is still largely in the "stitching" stage. In the name of originality, it is the work of purchasing.
A former iQIYI employee told 36Kr that iQIYI's originality and purchase are only the difference in the degree of participation. iQIYI has a lot of long-term cooperation with production studios (variety shows and film and television dramas), the general way of cooperation is that the studio undertakes the main production work, "iQIYI claims that 'self-made', they will be more dominant, more involved, cooperative procurement, they participate less." ”
This means that the traffic that the platform relies on is extremely uncertain. Once the cost of capturing traffic exceeds the advertising revenue, the gap between losses and expansion is more difficult to bridge.
What's more, in terms of bulk procurement of film and television dramas, iQiyi's steps seem to be unstable. Recently, Tencent once again sold 1.8 billion yuan and obtained the exclusive information network dissemination right of no less than 6332 film and television programs in the total number of Huashi networks. In the past, whether the model of joint procurement by the three companies of Aiyouteng from Huashi Network Will change as a result, and it remains to be seen whether the purchase cost of iQiyi will increase the cost of film purchases.
Considering that iQiyi has also issued convertible bonds three times before, if it is forcibly redeemed, its cash flow problems will only be more difficult. In addition to the repeated emphasis on cost reduction and efficiency increase, iQiyi's lack of money is also reflected in the choice of private debt issuance during the period of dollar tightening.
On March 4, iQIYI announced the signing of subscription agreements with investment institutions such as Baidu and Oasis Management Company Ltd. Investors agreed to purchase a total of 164705882 newly issued Class B common shares and 304705880 newly issued Class A common shares in private placement for a total purchase price of $285 million in cash. Baidu will subscribe for Class B common shares, and other investors will subscribe for Class A common shares.
iQIYI needs financing, but $285 million is only a drop in the bucket in front of iQIYI's debt mountain, how can the hidden risks be relieved? Long videos are trapped in the profit trap, and their Netflix dreams stay in the wind.
Stay tuned for more information
![iQiyi took the initiative not to roll up: it will achieve operational breakeven within this year[fig]](data:image/gif;base64,R0lGODlhAQABAIAAAP///wAAACwAAAAAAQABAAACAkQBADs=)