iQiyi doubles down on originals, AI and international growth

Leading Chinese streamer iQiyi aims to double down on its strategy of building a strong slate of originals following a mixed 2023 that saw it consolidate solid revenue growth but a drop in subscribers.

iQiyi posted strong full-year revenue growth but saw its average daily subscriber base fall sharply year-on-year, with very modest revenue growth in the fourth quarter and a drop in Q4 operating income.

iQiyi had an average daily subscriber base of 100.3 million in Q4, down from 111.6 million for the same period in 2022 and down from 107.5 million in Q3. Excluding trial members, the average Q4 base was 99.5 million, down from 110.9 million in Q4 for 2022 and from 106.9 million in Q3 of last year.

Speaking on an earnings call this morning, founder and CEO Yu Gong said iQiyi had continued to build on its success following “an iconic turnaround” in 2022.

Yu said that the company’s focus on efficient creation of premium original content was key to its turnaround and to improving subscriber engagement and loyalty.

He said that iQiyi’s “originals capabilities is openly recognised as the most important defensive barrier protecting our business”, with improvements in efficiencies in creating a stream of original dramas contributing significantly to the company’s bottom line.

He said that the key focus moving forward would be leaning on a pipeline of premium original content to improve customer lifetime value and average revenue per member.

He said that “technology innovation in long form video” had “translated directly into an increase in our profit”, with the company aiming to increase profits this year at a faster rate than it grows revenue.

Generative AI

Yu said that the use of technologies including generative AI as part of its content management programme would further improve efficiencies in content creation. He said generative AI had particularly strong potential in improving efficiency in the creation of animated content. The company aims to invest in and make greater use of LLM AI in the content creation process in the future.

iQiyi is also planning to up its quotient of kids and animated content going forwards.

Yu said that “fluctuation in our subscriber numbers motivates us to boost the quality of our content [to] further engage underserved demographics” at both ends of the age spectrum.

He added that iQiyi’s services represented great value compared with other ways of spending disposable income such as going to the cinema or to restaurants for a family meal.

International growth

In addition to continuing “healthy growth” in 2024, iQiyi aims to build its advertising business and to extend to ancillary business lines including international growth. Yu mentioned its success in building telecom distribution partnerships in markets including Singapore and Thailand and its move to integrate more international content in its offering, including titles from Malaysia.

iQiyi posted Q4 revenues of RMB7.7 billion (US$1.1 billion), up 1%, and full-year revenues of RMB31.9 billion, up a more impressive 10%.

Q4 operating income was RMB927.8 million, down from RMB978.7 million, while full-year operating income was RMB3.6 billion, up from RMB2.2 billion.

Average revenue per member was up 13% to RMB15.98 in Q4.

Membership services revenue in Q4 was RMB4.8 billion, up 1% year over year, while online advertising services revenue was RMB1.7 billion, up a more impressive 6%.