iQiyi stops reporting sub numbers, revenues drop, profits up

Chinese streamer iQiyi saw revenues drop by 5% year-on-year in the first quarter to RMB7.9 billion (US$1.1 billion), but operating income increased from RMB858.6 billion to RMB944.8 billion over the same period.

Membership revenue was down 13% to RMB4.8 billion, which the company attributed to a ‘high base effect’ for the same period last year. The decline was partially offset by an increase in advertising revenues, up 6% to RMB1.5 billion, driven by the distribution of a number of major titles.

The company however stopped reporting subscriber numbers, arguing that this metric did not reflect the progress it was making towards its goals. It said that the three drivers for revenue were average revenue per member, lifetime value and membership scale, and that these needed to be taken together to give the complete picture. The company’s management alluded to Netflix’s decision to stop reporting its quarterly sub count to additionally justify the move.

At the end of last year, iQiyi had an average daily subscriber base of 100.3 million in Q4, down from 111.6 million for the same period in 2022.

For Q1, revenues from partnerships helped boost the streamer’s other revenues segment, up 8% to RMB718.4 million, while content distribution revenue was up 27% to RMB928 million.

Cost of revenues was down 5% to RMB5.6 billion, thanks to lower content costs – the main element – driven by a shift in content strategy and operating efficiencies, including the increasing use of generative AI in content production.

On an earnings call following publication of the results, Yu Gong, founder, director, and CEO of iQiyi, said that average revenue per member was at a high, and that ARM was the key driver of the value of membership services.

Gong said that highlighted the quality of the company’s content production, with hit drama The Knockout having a particularly strong impact. He again said he saw a strong opportunity for international expansion and highlighted the success of iQiyi content in Thailand.

He said that iQiyi retained the number one position in viewership share in the general category.

Gong said that the company was focused on maximizing the lifetime value of members, and highlighted six sequential quarters of ARM growth. He said that iQiyi had “the opportunity to further refine its pricing strategy” in the future. The launch of an Express package brought in more revenue and rose the profile of key content, he said.

Gong said that he also expected a strong rebound in advertising this year, and highlighted the role of AI in increasing the value of advertising for brands.