Chinese streaming site iQiyi bets on local content to drive growth

Back in 2011, Chinese online streaming site iQiyi paid for the rights to Transformers: Dark of the Moon, betting that the Michael Bay-directed Hollywood blockbuster would help jumpstart its efforts to attract paying viewers. The robot flick sputtered.

Three years later, Beijing Love Story, a local film about five pairs of lovers, helped iQiyi sign up its first five million paid subscribers.

Since then, Chinese hits like Wolf Warrior, The Wandering Earth, Operation Red Sea, and Detective Chinatown have convinced iQiyi chief executive Gong Yu that the future lies in original local content.

Photo credit: gmast3r / 123RF

“We want to make original films one of our top priorities in the coming two to three years,” Gong, 51, said in a recent interview in Beijing. “With the slower growth in China’s box office, lower attendance rates at cinemas and the limited options of movies for the country’s cinema-goers, we think the timing for us to make a change in the movie industry has arrived.”

The company announced a plan this month to invest in six films in 2019, each with a budget of between 20 million yuan (US$2.9 million) and 50 million yuan (US$7.2 million).

Spending may be increased in the future if the plan proves successful.

iQiyi was behind the production and distribution of the popular variety show The Rap of China as well as the hit period drama The Story of Yanxi Palace.

The move to promote local content is borne out by the numbers. Domestically produced films account for 62% of China’s total box office takings in 2018, compared with 48.5% in 2012, according to data from the State Film Administration.

Films with heroic themes have done particularly well, such as Wolf Warrior 2 and The Wandering Earth. The former tells of a Chinese soldier who protects medical aid workers in Africa, the latter features a Chinese astronaut sacrificing himself to save Earth.

iQiyi, which is controlled by search giant Baidu, invests heavily in acquiring exclusive licensing rights of existing film catalogues from movie studios to fend off competition from rival movie streaming platforms backed by deep-pocketed Tencent Holdings and Alibaba Group, the parent company of South China Morning Post.

“Chinese consumers no longer care about whether a movie is a made-in-US blockbuster or not, they will go and watch a movie as long as the content quality is good,” said Ya Ning, president of iQiyi Pictures.

Ya added that is why even when facing competition from the big-name movie Avengers: Endgame, which is smashing all kinds of box office records in China, Lebanon’s relatively unknown Capharnaum was still able to secure more than 200 million yuan (US$28.9 million) from the box office with almost a mouth-to-mouth marketing.

In the West, the heavy investments by Netflix in original movies has made the US streaming service giant a formidable competitor to traditional Hollywood studios, as its rich offering of at-home entertainment could mean less time and money spent by consumers at theaters. It has also upended the traditional practice of “windows,” where new films would not be shown on TV until the theatrical release was finished. Ignoring this time frame has become an irritant for traditional studios but a source of pride for Netflix that likes to do things its own way.