As soon as the 2021 calendar turned to December, iQiyi broke the news of large-scale layoffs, with a layoff ratio of 20% to 40%. On December 1, the Shell Finance reporter of the Beijing News learned from many sources that iQiyi’s layoffs involved multiple departments. Except for the core dramas, variety show procurement, and production departments that have not been laid off, the user product department and short video follow-up Engraving, smart hardware (VR), animation, and games are among the layoffs, and public departments such as the market also have layoff indicators.
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“Older and older employees are more affected,” a former employee of iQiyi told the Shell Finance reporter. “It’s time to lay off employees. They have too many people, seven to eight thousand, nearly twice the number of companies of the same type in the industry,” an industry insider told the Shell Finance reporter.
In response to the above questions, the Beijing News Shell Finance reporter repeatedly asked iQiyi for verification, but did not respond to the article as of press time.
The layoffs came fiercely, known as the largest layoffs in iQiyi’s history. Although some employees said that the layoffs were without warning, it can be seen in iQiyi’s financial report and stock price changes as early as.
Three bonds issued to replenish blood after the listing, Gong Yu set the focus of his work to increase revenue and reduce expenditure
A month ago, iQiyi disclosed its three quarterly reports. The net loss attributable to iQiyi was 1.7 billion yuan, an increase of 41% over the same period last year. This not-so-beautiful report card caused iQiyi’s share price to plummet by 17%. This year, iQiyi’s stock price reached a high of $28, and now only $5.6 is left, a drop of nearly 80%.
Since its inception, “loss” has always been a word that iQIYI can’t avoid. Since 2016, the total loss has exceeded 30 billion, and the financing of more than 50 billion has become the norm.
In November 2018 and March 2019, iQiyi issued bonds to raise US$750 million and US$1.2 billion respectively. In December last year, iQiyi announced for the third time the issuance of US$800 million convertible bonds at a premium of 25% to 30%. So far this year, iQiyi has not announced its bond issuance plan, but in November it repurchased approximately US$747 million of convertible senior bonds maturing in 2023 with a coupon rate of 3.75%.
Faced with the question of when to make a profit, Gong Yu, the founder, director and CEO of iQiyi, said in a three-quarter report analyst call held on the evening of November 17, “This will take time, but this stage is not far away. , Because iQiyi has accumulated more and more IPs.” iQiyi often says “one fish eats more”, which is to develop IP into different forms in terms of content and production. For example, it was originally a novel, but now it has become After a series, a movie, it becomes an animation, and an animation becomes a game. When these comprehensive incomes, including advertising income, membership fee income directly drawn from users, and monolithic on-demand income, exceed the investment in content, this business model is established.
At the aforementioned analyst meeting, Gong Yu also mentioned the issue of increasing revenue and reducing expenditure. “For iQiyi, the focus is to increase revenue and reduce expenditure, mainly cutting down inefficient businesses and projects, increasing and trying new monetization opportunities.” This is regarded by the outside world as the “starting gun” for iQiyi’s layoffs.
The epidemic is superimposed on the economic environment, and the main business is affected
From the perspective of business composition, membership advertising, online advertising services, content distribution, and others are iQiyi’s four main businesses: iQiyi’s membership service revenue in the third quarter was 4.3 billion yuan, an increase of 8% over the same period in 2020; online Advertising service revenue was 1.7 billion yuan, a decrease of 10% over the same period in 2020, content distribution revenue was 630 million yuan, an increase of 60% over the same period in 2020; other revenue was 1 billion yuan, an increase of 3% over the same period in 2020.
Among them, membership business and advertising business are its main sources of revenue, but these two businesses have suffered a certain impact this year and their growth has been weak.
The growth of membership business depends on the number of members and ARPPU (average revenue per paying user). In terms of the number of members, iQiyi has entered a bottleneck period. In the third quarter, the number of iQiyi members was 103 million. Compared with 106 million in the second quarter, there was no growth but a slight decline.
The small 8% increase in iQiyi’s membership income in the third quarter was due to the growth of ARPPU. Since 2020, iQiyi has adopted member price increases and advanced on-demand methods to increase ARPPU, including the opening of gold, star diamond, sports and other members. The membership fee has been increased from 19.8/month to 25 yuan/month. In addition, There is also an advanced on-demand broadcast that has brought some growth to iQiyi but has been widely criticized. But in October of this year, with the increasingly strict supervision and the decline in user satisfaction, iQiyi announced the cancellation of advance on-demand.
And the second-largest business advertisement is not smooth. The financial report shows that unlike last year’s growth trend, iQIYI’s advertising business revenue continued to decline in 2021, from 1.9 billion in the first quarter to 1.7 billion. IQIYI’s explanation was due to the lack of high-quality content launched in the quarter and full of challenges. The macroeconomic environment.
On the one hand, the turmoil of the general environment. The emergence of the epidemic has caused advertisers to reduce their budgets, and smaller budgets have also been allocated to performance advertising that combines quality and efficiency. For example, short video platforms with huge traffic are also robbing long videos. In the advertising market, the advertising revenue of iQiyi, which is dominated by brand advertising, has declined for several consecutive quarters.
On the other hand, platform policy changes. In order to increase advertising revenue, video platforms have introduced a variety of advertising formats such as mid-slots and pop-ups, but these tricks have brought growth and also aroused user disgust.
In November this year, the Zhejiang Provincial Consumer Protection Committee interviewed five video platforms, iQiyi, Youku, Tencent Video, Sohu, and PPTV on the issue of video platform advertising, and asked them to provide summary ads, pause page ads, end credits, and pop-ups. Advertisements, marquee advertisements, etc. were rectified.
Subsequently, the State Administration for Market Regulation issued the “Administrative Measures for Internet Advertising (Draft for Public Comment)”, which clearly stipulated that the lack of a closed sign for advertising is strictly prohibited, restrictions on the closing of advertisements at the end of the countdown shall not be established, and advertisements shall not continue to pop up after closing.
In this way, the slowdown of the two pillars of business directly affected iQiyi’s open source efficiency.
Quality content is scarce and cost is high, long video winter is here
Expenditure is throttling after increasing revenue.
The root cause of the growth of membership business and advertising business is high-quality content, but the epidemic has caused the long-term video industry to face insufficient content supply. Gong Yu said at the above-mentioned analyst meeting, “The epidemic is the most direct cause. For example, so far, the number of movies launched this year is less than half of the same period last year, and the number of TV series launched is less than one-third of the same period of the previous year. The release of the drama was delayed due to review reasons, and the quality was compromised after the release, and this was only part of it. There was a relatively big problem with the content supply.” Gong Yu said.
While growth is being affected, iQiyi’s costs are also rising. In the third quarter, iQiyi’s cost of revenue was 7 billion yuan, an increase of 10% over the same period in 2020. The increase in revenue cost was mainly due to the increase in content costs in the quarter. Content costs are an important part of the cost of revenue. Expenses are 5.3 billion yuan, an increase of 13% compared to the same period in 2020; sales, general and administrative expenses are 1.2 billion yuan, a decrease of 9% compared to the same period in 2020; R&D expenses are 683 million yuan, a year-on-year increase of 13%. An increase of 2% in the same period in 2020. In summary, iQiyi’s operating loss in the third quarter was 1.4 billion yuan, compared with 1.2 billion yuan in the same period in 2020, with an operating loss rate of 18%.
Content cost still accounts for the bulk, accounting for 69.8% of the total cost, but for content platforms, this part of the content cannot be reduced. The quality of the content directly determines the retention and growth of users.
In terms of long videos, the Misty Theater launched by iQiyi last year created hit dramas such as “The Hidden Corner” and “The Silent Truth”, but this year has fallen short of expectations. The planned 4 dramas have already aired 2 of them. The high Douban score of “Bajiaoting Misty” was only 5.7 points, with 59,000 people, while last year’s “The Hidden Corner” with the same theme scored 8.8 points, with 992,000 people.
In variety shows, the talent show “Youth with You 3”, which brings huge membership growth and advertising sponsorship fees to iQiyi every year, was exploded. This incident directly led to the suspension of the season’s purpose. At the same time, the idol talent show was also blocked. Permanently banned.
As Gong Yu said, most of the breaking circles are accidental. How to continue to create hits is a problem that every video platform has to face.
In addition, Gong Yu mentioned in the above-mentioned analyst conference call that the competition for user time by short videos is an important reason for the challenges facing the industry.
According to the 48th “Statistical Report on China’s Internet Development Status” released by the China Internet Network Information Center (CNNIC), as of June 2021, among the 944 million online video users, 888 million watched short videos. Short video users have already accounted for To 87.8% of netizens as a whole.
According to statistics, in March 2021, the average daily usage time of short video applications per capita was 125 minutes, while longer videos were 27 minutes higher, and the gap was increasing. Among them, 53.5% of short video users watch short video programs every day. A proportion of longer videos (36.3%) is 17.2 percentage points higher.
In order to maximize the value of the content, iQiyi also launched its own short video product in 2020-anytime, but it failed to make a sound. It is reported that the Instant Business Department is also the hardest hit by layoffs. According to Sina Finance News, short video products will be merged with other products at any time, and only 40% of the people can stay.
Beijing News Shell Finance reporter Song Meilu, Bai Jinlei, editor Yue Caizhou, proofreading by Zhang Yanjun and Lucy
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