The challenge of sustained profitability has plagued long-video platforms for over a decade. Amid the collective focus on returning to content quality, both Youku and iQIYI are eagerly awaiting the next super hit.

In 2024, it remains difficult for long-video platforms to generate profits.

Financial reports show that iQIYI's revenue for the second quarter of 2024 was 7.4 billion yuan, a year-on-year decrease of 5%. Notably, adjusted net profit attributable to shareholders in the second quarter was 247 million yuan, down from 595 million yuan in the same period last year. After a promising year, iQIYI once again finds itself in a profitability dilemma.

As for its long-time rival Youku, the situation is also bleak. The ranking of Youku, iQIYI, and Tencent Video has long been reversed. According to the "Quest Mobile 2023 Content Videoization and Commercialization Insight Report," Youku has a monthly active user base of only 230 million, significantly lower than iQIYI's 473 million and Tencent Video's 416 million. More concerning for Youku than its monthly active user numbers is its loss of voice. Despite being backed by Alibaba's Digital Media and Entertainment Group, Youku's recent financial reports mention only new dramas, with no market data to speak of. As the only loss-making segment among Alibaba's six major business units, Youku lacks revenue data support in the group's financial reports, indicating its precarious business position.

In fact, the challenge of sustained profitability has plagued long-video platforms for over a decade. Amid the collective focus on returning to content quality, both Youku and iQIYI are eagerly awaiting the next super hit. However, content homogenization, scarcity, and high costs have become burdens for long-video platforms. Even if a leading player emerges victorious in the long-video market, it cannot escape the shadow of short-video giants.

A bumpy road ahead for iQIYI and Youku!

01 Profit-seeking tactics frequently trending on social media; long-video platforms struggle with profitability

When long-video companies resort to various tactics to generate revenue, they often trend on social media. Recently, iQIYI found itself in the spotlight for precisely this reason.

On September 5, the Asian Qualifiers for the 2026 FIFA World Cup kicked off, with China's men's national football team facing Japan in their first away match. National fans paid close attention, but to their surprise, CCTV did not broadcast the match and issued a statement explaining the breakdown in negotiations. It turned out that the Asian Football Confederation's copyright holder demanded exorbitant fees, and CCTV failed to reach an agreement with domestic distributors, one of which was iQIYI.

More surprisingly, iQIYI set both China matches on September 5 and September 10 as pay-per-view events, requiring either a sports membership or a one-time fee of 9 yuan for live streaming. Due to the significant impact and technical glitches during the live broadcasts, many paying viewers were unable to watch, causing iQIYI to trend on social media.

Given the significance of these matches, why was iQIYI unable to partner with state media and share costs with advertisers? Instead, it chose a method that C-end users found unacceptable, ultimately driven by the pressure to boost revenue amidst poor performance.

As a long-video platform, content is king, and this is a consensus in the industry. In 2022-2023, iQIYI produced five dramas, including "The Breakthrough," that surpassed 10,000 heat index points. However, in the first half of this year, the number of hit dramas produced by iQIYI declined sharply. Long-video users' loyalty largely hinges on the content, leading directly to a decline in subscription revenue. To maintain revenue, iQIYI resorted to increasing advertisements, much to the annoyance of viewers.

Previously, iQIYI's app was criticized for not allowing basic members to skip the first 120 seconds of video ads. Despite clear prompts stating that basic members cannot skip pre-roll ads, users felt frustrated at having to watch ads even after paying for a subscription.

In other words, to minimize ad interruptions, iQIYI's membership tiers require increasingly higher fees. The question is whether the market recognizes this value proposition. As ads increase, many users complain that video app ads disrupt the viewing experience and lack regulation, with some even containing vulgar, suggestive, or terrifying elements. One user reported seeing a full-screen ad for the horror movie "The Ghost Bride" while pausing a video on iQIYI's TV version, Galaxy iQIYI, with a terrifying character staring back at them.

Such advertising practices inevitably lead to user resentment. According to data from the Consumer Protection Platform under the China Electronics Chamber of Commerce, complaints against video platforms have risen steadily from 2021 to 2023, with a total of 11,942 complaints in 2023, a year-on-year increase of 98.34%. Since 2024, complaints have continued to grow, with 5,884 complaints received by the platform involving a total amount of 19.27 million yuan.

Complaints are obviously an initial way for users to express dissatisfaction, but legal action represents a more advanced form of redress. In January 2023, a seven-year veteran user sued iQIYI, alleging that as a Gold VIP member, their screen mirroring resolution was restricted without notification. The court ruled in favor of the plaintiff in 2024, ordering iQIYI to compensate them with 41 days of Gold VIP membership.

In fact, the industry has long reached a consensus on restricting screen mirroring to generate revenue. As early as July 2022, users discovered that Youku began prohibiting VIP members from mirroring certain content to TVs. Currently, Youku's app shows that the discounted price for a standalone Youku VIP annual subscription is 128 yuan, while the discounted price for an SVIP annual subscription is 248 yuan.

Following a similar approach, long-video platforms resort to various tactics to generate revenue. Despite criticism, they persist in their efforts to achieve their common goal of revenue growth.

02 Renewed focus on theatricalization; competition becomes more overt

Four years ago marked a turning point for long-video platforms as they sought to break through with content. At that time, iQIYI and Youku launched Mist Theater and Suspense Theater, respectively, targeting high-quality, thought-provoking themes that quickly ignited the market.

Among them, iQIYI's "Hidden Corner" became a hit in 2020. Compared to traditional long-form dramas, "Hidden Corner" garnered acclaim for its cinematic quality and short episodes, leading to numerous collaborations for iQIYI. Its premium viewing options and branded theater marketing strategies achieved industry success, attracting advertisers such as OPPO, Mizone, Audi, and Volkswagen.

Having discovered a winning formula, iQIYI relied on hit dramas to gain prominence in the following three years, solidifying its position as a leading online drama producer. However, a turning point occurred this year.

Since the beginning of the year, only "The Wind Chaser" has stood out for iQIYI, while dramas like "Misplaced," "The Invisible Shadow," and "Untold Story" failed to meet expectations. In contrast, Youku upgraded its Suspense Theater to Night Theater and produced three consecutive hits. "Faint Glow" received a high rating of 7.6 on Douban upon its release. "The Past in the Present" has since risen to a Douban rating of 8.2, making it the highest-rated domestic online drama in Douban history. "New Life" achieved the top ranking in pure online dramas, short-form dramas, and suspense dramas in terms of average episode views in 2024.

As the balance of power shifts, competition between the two platforms has become more overt. On May 6, "New Life," a realistic suspense drama, premiered on Youku's Night Theater. Just two days later, iQIYI's Mist Theater countered with "Untold Story," heightening the tensions between the two platforms.

Amid this shifting landscape, Youku and iQIYI have swapped positions in the hit drama race. While continuing to compete in the suspense genre, they have also ventured into new battlegrounds.

This year, iQIYI launched "Dramatic Theater" and "Micro Dust Theater." "Micro Dust Theater" focuses on high-quality short dramas, showcasing extreme imagery in works like "My Altay" and "In This World." Meanwhile, "Dramatic Theater" primarily adapts works by renowned literary figures, presenting their literary insights through visual storytelling.

The increasing number of drama genres is making the long-video landscape increasingly specialized, a trend rooted in past industry explorations. According to the "2022-2023 Television Drama Market Analysis White Paper" released by EntGroup, the domestic drama market has undergone transformational challenges, with the total number of dramas declining for three consecutive years. In 2022, 342 dramas aired, of which 137 were urban dramas, an increase of 20 from the previous year and accounting for 40% of the total.

The issue of content homogenization has emerged, making it imperative to expand genre content.

In this regard, iQIYI has been a pioneer. Its "Farmer's Diary" is set against the backdrop of farming life, focusing on farming practices and prosperity, shunning the vortex of ancient power, wealth, and status.

With its relatively niche theme and novel plot, "Farmer's Diary" garnered attention from both audiences and the market, surpassing 8,500 heat index points on iQIYI within just five days of its release and amassing over 1 billion views on Weibo under the same hashtag.

Similarly, Youku's niche drama "Fragrant Secret" also achieved notable success, topping the EntGroup Drama Popularity Index upon its premiere. Leveraging low costs and the IP support of Zhihu, the reincarnation genre officially took off on long-video platforms.

From suspense to period dramas and from mainstream to niche genres, iQIYI and Youku are locked in a fierce competition. However, as leading players in the long-video platform landscape, their battles remain internal, with external threats lurking just outside their doors.

03 Under the onslaught of micro-short dramas, long-video platforms vie for a slice of the pie

The trend towards quality content production on long-video platforms is undeniable. Pony Ma, CEO of Tencent, has publicly stated that rather than producing mediocre dramas, resources should be concentrated on creating high-quality works.

This philosophy has been embraced by the industry, with data confirming its validity. According to the Entertainment Data Analytics Platform, the number of effective dramas in the online streaming market was 294 in 2023, a decrease of 10.6% from 2022. However, viewership significantly improved, with a total play index reaching 38.612 million, marking a 7.7% year-on-year increase.

Yet, as iQIYI turns the corner towards profitability and Youku narrows its losses, a pressing reality emerges: the scarcity of hits destines revenue fluctuations for long-video platforms. Betting solely on high-quality dramas poses significant risks for business operations.

iQIYI's performance offers a glimpse into the industry's anxiety. Since the first quarter of 2024, iQIYI has ceased disclosing user numbers. However, according to QuestMobile estimates, iQIYI's monthly active user base was 401 million in March 2024, a year-on-year decrease of 19.5%. Similarly, Youku has not disclosed its paying subscriber count for over three years, highlighting the real issue facing long-video platforms: where will the growth come from?

According to the "China Online Audio-Visual Development Research Report (2024)," as of December 2023, China's online audio-visual user base reached 1.074 billion. Meanwhile, iResearch's "2023-2024 China Micro-Short Drama Market Research Report" reveals that China's micro-short drama market was worth 37.39 billion yuan in 2023, a year-on-year increase of 267.65%. It is projected that this market will exceed 100 billion yuan by 2027. In the first half of 2024, Douyin and Kuaishou platforms actually broadcasted 381 micro-short dramas, a year-on-year increase of 9.2%. Nearly 80% of these dramas garnered over 10 million views, with four exceeding 1 billion cumulative views.

Behind this vast market lies a user base exceeding 500 million, becoming a coveted target for video platforms amidst dwindling internet dividends.

Admittedly, long and short videos differ significantly in business logic, fan demographics, and consumer behavior. However, it is undeniable that they are engaged in a zero-sum game. Every minute spent watching content on one platform translates to a minute lost for the other.

Short-video platforms have soared in popularity due to their high stickiness, fast pace, suitability for fragmented time, and minimal video ads, all of which are precisely the Achilles' heel of long-video platforms. Moreover, short-video platforms boast a substantial paying user base, accounting for up to 30% of their revenue, making them an attractive target for all parties.

Furthermore, the transition from long to short videos is a mere step away. While iQIYI and Youku have yet to take this step, Douyin and Kuaishou creators have already monetized through various forms of secondary creation, leaving long-video platforms feeling like they are doing the work for others.

In 2021, 53 film and television companies, including iQIYI and Youku, along with five video platforms and 15 film and television industry associations, issued a joint statement announcing their intention to take legal action against unauthorized editing, excerpting, reposting, and distributing film and television content online.

Subsequently, cases emerged, such as iQIYI suing Kuaishou for unauthorized streaming of "Nirvana in Fire" and "Old Nine Doors," and Youku suing Bilibili for unauthorized streaming of "I Am Not Madame Bovary." Relations between long and short-video platforms became strained, with business conflicts simmering on the brink of eruption.

Nonetheless, for the sake of their own development, it is inevitable that long-video platforms will enter the short-video market. Youku has established a micro-theater channel, while iQIYI has launched a "Vertical Screen Theater." Tempted by the allure of short dramas, long-video platforms are naturally drawn to this new frontier.

However, the first-mover advantage of short video platforms has formed a moat, and newcomers cannot bypass Douyin and Kuaishou's territory if they want to acquire customers and make profits.

On July 19, 2022, iQIYI and Douyin announced significant news, officially reaching a cooperation agreement. iQIYI will open its long-form video content copyrights to Douyin for short video creation. Additionally, both parties will explore the creation and promotion of long and short video content, initiating a new model of cooperation and win-win for both long and short videos.

iQIYI's major shift and collaboration with the short video giant can be seen as a response to the times. In contrast, Youku's approach focuses more on upstream content. In 2023, 93% of Youku's top short-form drama projects became profitable on the platform. According to the 2023 Deltawen Micro-Shorts Prosperity Index ranking, five of the top ten Youku short dramas originated from Youku itself.

Such a high profit margin is impressive in today's flooded short-drama market. The secret to Youku's success lies in its content barriers. After deep collaboration with leading IP platforms such as iQIYI, ChineseAll, and Migu, Youku secured the core, IPs, exciting points, and plots of short drama projects, naturally attracting users' attention and praise.

Clearly, both iQIYI and Youku are vigorously exploring their paths to growth in the short video sector. Facing formidable competitors, both parties have chosen to turn enemies into friends and leverage each other's strengths. It's not about backing down; after all, getting a slice of the pie is what matters most.