iQiyi books annual profit for the first time, expects high-quality growth ahead

Chinese video streaming website iQiyi achieved an annual profit for the first time in 2022, in response to its earnings report posted on Wednesday. The Baidu-backed long-video platform posted a non-GAAP web profit of RMB 1.3 billion ($186.2 million) and a 5% fall in income from the earlier 12 months to RMB 29 billion.

The Nasdaq-listed firm is eyeing “high-quality growth” in 2023, aiming for simultaneous growth in working profit and income, its CEO Gong Yu mentioned in a associated earnings name.

Why it issues: iQiyi has been dropping cash since its founding in the early 2010s. Its present profitability is essentially due to aggressive cost-cutting since the finish of 2021, fine-tuning content material manufacturing, and new subscriber growth. Its rivals Tencent Video and Youku have but to show an annual working profit.

Details: iQiyi managed to lower its income prices by 19% in 2022. The platform produced numerous extensively standard unique video sequence, and grew its members to 120 million, offsetting a few of its losses in advert income as the content material enterprise as an entire noticed much less advert expenditure final 12 months. 

• Membership service income — the main income supply for iQiyi, accounting for 60% of its income — elevated by 6% to RMB 17.7 billion. Meanwhile, the firm’s income generated by internet marketing companies and content material distribution decreased by 25% and 14%, respectively.
• The persevering with cost-cutting measures have contributed to a big discount in iQiyi’s bills, with each administrative bills and R&D bills falling greater than 20% in 2022.
• iQiyi’s subscription membership grew by greater than 10 million in the fourth quarter of 2022, and its whole variety of subscriptions was near 120 million by the finish of December.
• Some of iQiyi’s video sequence that reached a large viewers in 2022 embody A Lifelong Journey, Love Between Fairy and Devil, New Life Begins, and Wild Bloom.
• Earlier this 12 months, the video website additionally acquired acclamation for its unique sequence The Knockout. Executives imagine the success of the hit drama is replicable, saying main unique content material manufacturing skill and operational functionality are key to iQiyi’s aggressive strengths. Streamed final month, The Knockout adopted a fictional hunt for corrupt native officers and has garnered greater than 300 million views. 

Context: Although The Knockout has confirmed an early 2023 hit for iQiyi, the steaming website has confronted a number of controversies over membership rights in latest months.

• The growth in iQiyi’s membership service income is due partly to subscription charges rising over the previous three years, with will increase starting from RMB 3 to RMB 20, a transfer that spurred rivals Tencent Video, Youku, and Mango TV to comply with swimsuit.
• Facing criticism from a government-backed shopper council and a lawsuit by one in all its customers, iQiyi dropped a plan to limit entry to high-definition screens amongst its paid members until they paid an additional charge for the service.
• On Feb. 15, iQiyi introduced that it might incorporate Baidu’s synthetic intelligence chatbot Ernie Bot into its content material search, promotion, and novel creation companies.