The dilemma of iQIYI's "sheep shearing"

Author | Huang Yu

Editor | Liu Baodan

Last year, iQIYI, which was shining with the success of "Skate into Love", has been having a tough time recently. On one hand, there is a lack of hit drama series, and on the other hand, the derivative concert of the variety show "Growing Up Diary" faced criticism for the "free offline, paid online" model.

According to Wall Street News, the second Maize Music Festival of the reality show "Growing Up Diary" produced by iQIYI was held on June 6th. Some audience members had previously obtained free offline tickets through official activities, while online viewers, even iQIYI members, had to pay 12 yuan to watch, and the viewing period was until June 14th.

This differential pricing model has sparked dissatisfaction among many viewers, questioning whether iQIYI is "taking advantage of users". In response, iQIYI customer service stated: "You can purchase tickets according to your needs to watch the concert live, and the edited version of the concert will be available online later."

In fact, this is not the first time that long video platforms represented by iQIYI have been criticized for "taking advantage of users". In addition to additional fees for derivative programs, in recent years, membership tier systems, early access, and VIP restrictions have often led to user backlash.

Behind the "nested doll" pricing, it reflects the growth anxiety faced by long video platforms like iQIYI entering a new development stage.

iQIYI's financial report for the first quarter of 2024 shows that iQIYI achieved a total revenue of 7.9 billion yuan in the first quarter, a 5% year-on-year decrease. The main reason is that the revenue from the membership service business, which accounts for more than half of the revenue, was lower than the same period last year, decreasing by 13% year-on-year to 4.8 billion yuan.

iQIYI explained that this change may be related to the high base effect brought by the popular drama series "Skate into Love" launched in the same period last year.

Over a decade ago, long video platforms like iQIYI started experimenting with membership services, gradually cultivating the habit of users paying to watch by providing richer and higher-quality content. At this stage, the number of members became a key focus of competition among major platforms.

However, as mobile internet entered a stage of competition for existing users and short video platforms rapidly rose, the growth of membership numbers and daily usage time of long video platforms faced a ceiling. iQIYI has begun to focus more on exploring new profit points.

A clear signal is that, following the footsteps of overseas streaming giant Netflix, iQIYI announced in the first quarter of this year that it will no longer disclose its number of members.

The management of iQIYI stated at the performance meeting that the number of members within a specific time period alone cannot objectively reflect the progress of the membership business, and the future core goal is to maximize long-term membership revenue.

Data shows that iQIYI's daily average subscription membership scale has decreased from 129 million in the first quarter of last year to 100.3 million in the fourth quarter. In the first quarter of this year, Tencent Video's paid membership increased by 8% year-on-year to 116 million.

Behind the slowdown in membership user growth, there are environmental influences on one hand, and the reasons for iQIYI's lack of hit content on the other 2022 and 2023 can be considered as relatively successful years for iQIYI. In 2022, iQIYI had a total of 5 drama series with popularity exceeding 10,000, compared to only two before. By the end of 2023, the number of drama series on iQIYI with over 10,000 popularity has reached twelve.

However, this year, iQIYI seems to be struggling in terms of hit drama series. Tencent Video has taken the lead this year with consecutive hit series "Blooming Flowers" and "Joy of Life 2". On the other hand, iQIYI's emergency response drama "Fox Spirit Matchmaker" against "Joy of Life 2" failed to make an impact, with the only drama series exceeding 10,000 popularity being the finale of the second quarter, "The Long Chase".

According to Yunhe Data, in the first quarter of this year, iQIYI's exclusive dramas occupied 6 spots in the top 20 for effective playback within 30 days, with "Southbound" ranking second and 4 other dramas outside the top 10. From April to early May, iQIYI dramas "Harbin 1944", "My Altai", "The Long Chase", and "City Within the City" ranked high in terms of effective playback.

The performance of iQIYI in the first quarter was somewhat flat, and market expectations for iQIYI are more focused on the second quarter.

Lu Yi, an analyst at BOC International, pointed out that in the second quarter, the performance of several key drama series has improved, and brand advertising has shown some recovery. In 2024, iQIYI will continue to build a stable production system, focus more on profit and cash flow performance rather than increasing membership numbers; potential growth points are expected to come from overseas business, IP derivative payments, and AIGC.

The competition among long video platforms has entered the second half, and major platforms will need to focus on improving user stickiness, enhancing content quality, and service experience to maintain their market position, instead of solely focusing on user growth.

While the "nested doll" charging model is an important attempt for long video platforms to explore new growth points, being too aggressive in this approach may lead to more losses than gains.

To become the "Netflix of China", iQIYI and others still have a long way to go