Text/Chen Feng

Editor/Midnight

How are long video platforms doing in the second half of 2024?

Although good dramas like "Tang Dynasty Mysteries: Westward Journey" and "Alleyway Life" continue to be released, offline entertainment, short videos, and other diversified content are also continuously attracting users' attention.

How to cope with challenges and tap into new growth space? Wire China Insight has noticed that iQIYI has already taken action to break the stalemate.

On November 21, iQIYI released its financial report for the third quarter of 2024. In the third quarter, iQIYI achieved total revenue of 7.2 billion yuan. Under Non-GAAP, iQIYI achieved an operating profit of 370 million yuan, achieving positive operating cash flow for 10 consecutive quarters.

Behind this steady performance, in the third quarter of this year, iQIYI launched a series of high-quality content in the areas of dramas, variety shows, movies, anime, and other long videos, driving a steady increase in iQIYI's market share in the long video sector.

Gong Yu, founder and CEO of iQIYI, said, "In the third quarter, iQIYI ranked first in terms of market share in the drama sector." Additionally, in the film sector, iQIYI's market share also led the industry for 11 consecutive quarters.

But what is more noteworthy about this financial report is that it reveals that iQIYI is accelerating its search for new growth in the video industry.

On the one hand, iQIYI announced its focus on micro-series, supplementing its existing content ecosystem to broaden long-term growth space in terms of content richness.

On the other hand, focusing on revenue growth in core businesses such as membership services, iQIYI is also actively innovating and taking big steps to continuously explore and optimize its membership products and service systems, enhancing member stickiness while further innovating membership revenue; in addition, iQIYI has also increased its layout in overseas markets, and the growth-driving effect has already emerged.

From a long-term perspective, while continuing to lay a solid foundation, iQIYI is also maintaining keen sensitivity to changes in content industry trends and taking the lead in bold attempts to accelerate the exploration of new incremental spaces.

1. Seeking Incremental Content: Focusing on Long Videos + Micro-series

For long video platforms, content is always the top priority.

Wire China Insight has noticed that in the third quarter, iQIYI performed commendably across different types of content, whether it be dramas, movies, variety shows, or anime.

Specifically, "Tang Dynasty Mysteries: Westward Journey" (the second season of the "Tang Dynasty Mysteries" series) that aired during this quarter became iQIYI's 14th drama with over 10,000 content heat values; the innovative variety show "The King of Comedy Monologue Season" topped the cloud data variety show dominance chart for ten consecutive weeks, further cultivating new comedy stars like Fu Hang and Xiao Lu.

In addition, in the film sector, iQIYI achieved industry-leading market share for 11 consecutive quarters, with theatrical films "Doll Catcher" and "All In" ranking first and second respectively in terms of in-station heat in the third quarter.

In the anime sector, iQIYI has further enhanced its self-production capabilities for domestic anime, with the proportion of self-produced anime revenue showing a continuous expansion trend. The popular "What a Mess" and newly launched "Divine Martial Emperor" and "Nian Wushuang" have all received good market response.

From a commercialization perspective, iQIYI's IP commercial value is being accelerated. Since this year, with high-quality IPs as the core, iQIYI has developed a variety of products such as derivatives, VR immersive theaters, and theme parks, extending from online to offline entertainment, tourism, and other diversified consumption scenarios.

In addition to continuing to consolidate its advantages in the long video content sector, iQIYI is also seeking incremental growth in the content sector, with one of its important actions being to focus on "micro-series".

During the earnings call, Gong Yu said, "The user base for micro-series is significantly different from the traditional film and television user base, and this type of content is a particularly good supplement to iQIYI's content. Especially with the rise of the free model for micro-series this year, the number of micro-series users has expanded rapidly, and this new free model is also an opportunity for us."

Based on this, from the dual-track layout of long videos and micro-series content, iQIYI's long-term construction ideas for its future content ecosystem have also become clearer:

Continue to use long videos as the long-term core of the platform's content ecosystem, but accelerate content supplementation around micro-series to better respond to the development trends of the content industry, meet users' diversified content consumption needs, and thereby promote the platform's long-term future development.

Objectively speaking, iQIYI's entry into the micro-series market is in line with the development trends of the content industry and the changing content consumption trends of users. To a certain extent, iQIYI also has advantages.

On the one hand, in recent years, China's micro-series industry has accelerated into a period of explosive growth. According to iResearch Consulting's estimates, the market size of the micro-series industry will reach 48.46 billion yuan in 2024, and the industry market size is expected to exceed 100 billion yuan in the next five years.

iQIYI must seize this opportunity. Gong Yu also judged that the evolution of long and short videos has brought possibilities for competition and cooperation and new growth space to the market.

On the other hand, although iQIYI only officially started focusing on micro-series this quarter, it had already accumulated a certain amount of content production and operation experience before that. For example, as early as 2020, iQIYI took the lead in launching the "Mystery Theater" featuring short dramas in the industry, attracting high market attention and imitation with cinematic production and concise narrative.

For micro-series, iQIYI is also trying to innovate in production concepts and business model design.

Gong Yu specifically mentioned that iQIYI's short dramas are not equivalent to shortened low-cost web dramas, and iQIYI's micro-dramas are not equivalent to low-quality mini-program micro-dramas.

This corresponds to the fact that the business model designed by iQIYI is also different. "Unlike the micro-drama business model in the market that uses more than 90% of revenue for investment, iQIYI's designed business model can distribute more than 70% of revenue to content producers." Gong Yu said so.

Image source: iQIYI official website

From the user's perspective, everyone has more choices when watching micro-series on iQIYI -

Now, both of iQIYI's mobile products, the iQIYI APP and the iQIYI Lite APP, are being upgraded. On the latest version of the iQIYI APP, users can directly start watching micro-dramas through the "Free" entry.

'On iQIYI, dramas with a vertical screen of 1-5 minutes are called micro-dramas, and dramas with a horizontal screen of 5-20 minutes are called short dramas. Now we have started to try innovating the business model, which is a relative innovation from the previous free or single-point payment business model. Now we have added a membership model,' said Gong Yu.

Currently, members can watch all micro-dramas for free; non-members can watch free micro-dramas, can also unlock member-exclusive micro-dramas with single-point payments, and can also watch short dramas for free during the second window period.

It is not difficult to find that, under the consistent high-quality content standards, innovative business models, and dual service models, iQIYI's focus on micro-dramas is not aimed at short-term gains, but at the coexistence of long-term content value and commercial value.

In the long run, iQIYI's focus on micro-dramas, on the one hand, further enriches the content choices for iQIYI VIP members, which is expected to help it attract more member users.

On the other hand, this also brings more marketing growth opportunities for brands, which is also incremental for iQIYI.

At the iJOY Autumn Joyful Sharing Conference, Wu Gang, Senior Vice President of iQIYI, summarized that with the launch of the micro-series theater, iQIYI's content marketing 'all-domain ecosystem' will continue to be upgraded, which will further unleash the commercial potential of the new 'long + short' drama ecosystem.

2. Mining More Growth Anchors from Membership and Overseas Markets

If we say that iQIYI focused on 'stability' in the third quarter, then we observe that iQIYI is expected to accelerate into a new growth channel next, potentially ushering in a theme of 'growth'.

A key signal is that, on the basis of continuously supplementing and optimizing the content ecosystem, iQIYI is also accelerating its exploration of new growth curves and has shown a good growth trend.

The innovation around membership revenue and the continuous enhancement of membership service rights and interests are the first potential incremental space for iQIYI.

In the third quarter of this year, iQIYI launched 13 additional episode gifts, with cash purchase amounts increasing by more than 40% month-on-month, setting a new high.

In addition, iQIYI has further enhanced membership benefits and held more than 20 offline events, such as fan meet-and-greets, advance screenings, family days, etc. These initiatives are expected to help promote membership upgrades and enhance membership stickiness.

What is more worthy of discussion is that iQIYI has also introduced multiple new initiatives to optimize its membership products and service systems.

On November 12, iQIYI launched the Gold VIP Membership Family Card package, which includes a family account monthly subscription (8 yuan/month) and a main account monthly subscription (25 yuan/month). Among them, the family account and main account experience are independent of each other and do not interfere with each other, and iQIYI members can enjoy member content, high-quality audio-visual and other benefits together with their families.

In addition, the basic membership product that supports advertisements, which was previously only available on the iQIYI Lite App, has now been expanded to all major iQIYI products.

It is worth noting that services such as membership family cards have already been successfully validated by overseas streaming giants such as Netflix.

As early as the beginning of last year, Netflix proposed a membership add-on plan, where members could open an additional membership account by paying an additional 7.99 USD (approximately 57 yuan) per month on top of the monthly payment of 15.49 USD (approximately 110 yuan) or 22.99 USD (approximately 163 yuan).

This brought new growth to Netflix, driving net growth in overall paid memberships and continuously tapping into more market increments.

In addition, the overseas business is another growth curve for iQIYI.

In the third quarter of this year, iQIYI maintained a strong growth momentum in its overseas business performance, with both total revenue and membership service revenue maintaining year-on-year and quarter-on-quarter growth.

Among them, iQIYI's membership service revenue increased year-on-year by more than 40% in Hong Kong, the United Kingdom, Brazil, and Australia. iQIYI's average daily overseas subscription membership also achieved year-on-year and quarter-on-quarter growth, with growth of more than 45% year-on-year in Brazil, Mexico, Hong Kong, and Thailand.

This is mainly due to iQIYI's continuous advantages in both mainland dramas going overseas and local overseas content.

For example, since the third quarter, the cumulative playback volume of "The Four Seas Reminiscence" has ranked first in markets such as the United States, Australia, Japan, and South Korea; in terms of local overseas content, the iQIYI International exclusive Thai drama "Golden Glow 2024" has also become a locally popular drama, setting a new record for single-day revenue from Thai dramas on iQIYI International this year.

Comprehensively, from further supplementing the content ecosystem to innovating membership products and optimizing membership service models, to laying out overseas markets, iQIYI's story of 'increment' is being accelerated.