Led by iQiyi, as long-form video platforms have successively changed their operating ideas and moved towards profitability goals, iQiyi, which was the first to complete its transformation, has begun to move towards the next stage.
Recently, iQiyi released its financial report for the second quarter of 2023 as of June 30. In addition to its still impressive content performance and performance results, iQiyi’s user-level quality advantages have become a highlight of its long-term competitiveness. After establishing a content growth flywheel, deep mining of user value will become an important guarantee for releasing the full life cycle value of content in the future.
This confirms iQiyi CEO Gong Yu’s statement at the iQiyi World Conference in May this year: “Horse racing and barbaric and extensive growth are no longer applicable. In today’s competition, game, and development, quality must come first. .”
Good content, great results
In the second quarter of 2023, iQiyi achieved total revenue of 7.8 billion yuan, a year-on-year increase of 17%; it achieved non-GAAP operating profit of 786 million yuan, with a non-GAAP operating profit margin of 10%. It has maintained operating profitability for six consecutive quarters. .
This is consistent with Gong Yu’s previous explanation of iQiyi’s operating tone in 2023: “iQiyi’s strategy in 2023 will be high-quality growth, that is, operating profits and revenue will grow at the same time.” At the same time, it is also in line with the US Stock Research Institute’s previous judgment on iQiyi’s high-quality content production capabilities: iQiyi has found a way to make sustainable production of high-quality content the norm.
In the first half of the year, iQiyi’s content performance was still very outstanding, and good content is still the cornerstone of performance growth.
Overall, Yien Data's "2023H1 Domestic Drama Market and Trend Research Report" shows that iQiyi contributed nearly half of the TOP20 dramas in the first half of 2023, ranking firmly among the four major domestic video streaming platforms. First - 35% of the TOP20 are exclusively broadcast by iQiyi, which strengthens users’ mental memory of the platform.
Among them, iQiyi original dramas accounted for 67% of the key dramas launched in the second quarter. In terms of key dramas, iQiyi covers 3 of the top 5 dramas in terms of playback volume. "Kurang Biao", which triggered the national drama-watching frenzy, ranks first, and "Changfengdu" is so popular that it ranks third.
Judging from the performance of a single episode, "Changfengdu" has exceeded 10,000 hits on the site only 41 hours after it was aired, setting a new record for iQiyi's content as the fastest to reach 10,000 hits. At the same time, "Changfengdu" demonstrated iQiyi's production capabilities, further enhancing advertisers' evaluation of the platform's continued production of good content and gathering of high-quality users, thus allowing "Changfengdu" to attract Nestlé, Vipshop, and With the cooperation of more than 40 advertisers including Huawei, it has become the drama with the best investment performance this year.
In addition, in terms of variety shows, "Farming" triggered extensive discussions on social media and was shortlisted for the Best Variety Show Award at the 28th Shanghai TV Festival Magnolia Award. "China Rap Showdown 2023" continues to become a representative program in China's specific music field. The songs are launched on Tencent Music, NetEase Cloud Music and other platforms, and it has also set a new high in revenue from this IP music copyright.
Beneficial content continues to perform well. iQiyi’s second quarter membership service revenue increased by 15% year-on-year, and advertising revenue increased by 25% year-on-year. In the second quarter, its operating cash flow was 886 million yuan, which was positive for five consecutive quarters; its free cash flow was 872 million yuan, which was positive for four consecutive quarters.
On the one hand, we can believe that iQiyi’s hit-making methodology and industrial production capabilities, which have been repeatedly emphasized and proven before, are still the guarantee for iQiyi’s success. On the other hand, with the support of iQiyi Express Edition and overseas business, iQiyi’s content distribution and communication capabilities are always spreading to the outside world. This quarter, iQiyi Express Edition’s total revenue has reached a record high.
Focusing on the rhythm of content production and new releases, in a conference call after the financial report, iQiyi Chief Content Officer Wang Xiaohui pointed out that in the long-cycle business of content, continuous production and supply of high-quality content is the only way to achieve continued success. The essential.
Looking forward to the third quarter, iQiyi has initially demonstrated the value of its summer schedule. Take "Lotus Tower" as an example. After its launch, "Lotus Tower" has successively topped the list of dramas such as Yunhe, Kuyun, and Beacon. It has become the tenth drama on iQiyi with a popularity value of over 10,000. set. Represented by "Summer of the Band 3", iQiyi's popularity in the variety show market has always remained high. It is foreseeable that in the third quarter when users generally consume more content, iQiyi's performance is also worth looking forward to.
This also leads to a new question: iQiyi’s monthly average single member revenue (ARM) in the second quarter reached 14.82 yuan, a year-on-year increase, and the average number of daily subscription members also reached 111 million, a year-on-year increase of 13%. "Double increase in volume and price" is undoubtedly a situation that the content industry hopes to see. In addition to insisting on good content in the long term, how can the platform take the initiative to improve the quality and value of member services?
After creating the advantageous impression that iQiyi's "products are high-quality products", it is time to focus on exploring the in-depth value of good content and enhancing user performance throughout the life cycle.
Strengthen long-term certainty and explore the aesthetics of user operations
As Gong Yu said, the goal of membership business is to maximize user experience to increase membership service revenue. "In the future, we will pay more attention to overall membership revenue, rather than simply pursuing an increase in the number of members." Looking at the content industry from a long-term perspective, whether it is the launch of new dramas or the renovation of old dramas, member users are always the cornerstone of value release.
Judging from the characteristics of the long video industry, it still belongs to the Internet industry, and competition around the membership service system is unavoidable.
Content consumption is different from physical consumption, and there are fixed consumption rules. The nature of the content determines that it should pursue the expansion of consumption methods and the creation of a consumption ecology - the willingness of new users to pay, the renewal choices of old users, and the payment duration of both, which are essentially determined by user satisfaction. This is amplified by the performance of countless content works and becomes the basis for the outside world to price the platform.
The three elements of paying user ratio, user life cycle, ARPU, and user system are still valid in the long video world. And iQiyi is making some positive achievements. For example, the number and proportion of iQiyi annual membership members have increased significantly compared with the same period last year. This is a manifestation of the improvement in retention rate and lifetime value. Of course, it is also a recognition of the value of iQiyi content.
More importantly, this also means that iQiyi has explored effective membership operation measures at the platform operation level. Because, although the membership system of the long video platform can also set trigger entrances and trigger rewards from aspects such as preferential activities, advertising resources, and social communication, just like e-commerce members and physical store members, these traditional methods are incompatible with the core, There is room for the most critical content value linkage, but the core needs of members themselves are not adequately managed, and what is lost is users' recognition of the content.
iQiyi is well aware of this. It does not engage in the "violent aesthetics" of new Internet operations that spread money, but carefully carves out the rights and interests of users and brings a real sense of gain to users in the virtual world. The key to this is the implementation of a membership loyalty program based on the membership level system and points system that was launched at the beginning of this year.
Depending on the type of membership subscribed by the user, such as gold, platinum, star diamond, etc., the user will receive different membership points. The points are also affected by the coefficient of the subscription period. That is, the greater the user's demand for content and the clearer the content, the more points will become a benefit. exchange basis. In August, iQiyi took this as a starting point and launched an activity to exchange membership points for extra gifts. Within 8 days of the "Lotus Tower" extra gift being online, more than 6 million members used their membership points to redeem to unlock special highlights and the finale.
There is a small detail hidden in it. For iQiyi, which is known for its self-made products, the panoramic display of member rights and dramas can actually be expanded through multi-dimensional supplementary content such as behind-the-scenes footage and production interpretations. In this way, users not only gain more content they need, but also see the value of the platform, which will significantly increase user loyalty.
It can be seen that iQiyi's membership system focuses on users' personalized viewing needs and consumes the excess rights generated by users in content payment and consumption. Using the most appropriate expenditures to add value to services, rather than embodying member value through the deduction of rights and interests, is an important thinking that drives iQiyi's member services towards a positive cycle. In the long run, this will also continue to strengthen the platform’s pursuit of confrontation. Combining two swords is a true long-term strategy.
Conclusion
In this financial report, iQiyi also mentioned its layout for the hot cutting-edge technology-AIGC. iQiyi has applied it in content production, market promotion, broadcast interaction and other scenarios. For example, iQiyi’s tens of thousands of content albums have introduced AIGC to assist in generating operational materials, and the site has more than 700,000 AIGC video clips, graphics and text and other operational materials.
However, compared to the universal application of AI technology itself, the industrialization process of film and television that iQiyi has always insisted on may be an important starting point for changing the supply logic of the industry. Data shows that the current accuracy of generative AI in dismantling scenes and characters in scripts exceeds 90%. This is closely related to the process, modularization and refinement of film and television production promoted by iQiyi. Products such as iQiyi’s intelligent production system and film and television production management system may further evolve in the AIGC wave.
Perhaps the more important thing is not the technology itself, but that since iQiyi promoted changes in the industry's logic, it has always held a tireless exploratory attitude towards the question of "where should the long video industry go?" This best second quarter is only part of the results. On the way to promoting its own value growth, iQiyi has opened up new space in the industry.
Source: US Stock Research Institute