Behind iQiyi’s long, painful road to profitability

From hooking subscribers by developing original blockbusters to tailoring content to user tastes, US-based Netflix has taught many lessons to its Chinese apprentices – iQiyi, Youku Tudou, and Tencent Video, which are respectively backed by Baidu, Alibaba, and Tencent.

The latest move that the China-based streamers have learned from their senpai is to raise subscription prices. This is the seventh hike in 10 years for iQiyi, who said that the revenue will go toward investing in content and offering “a wide variety of quality entertainment options.”

This comes at a time when some of the world’s pandemic tech darlings are coming under increasing competition and inflationary pressure.

Netflix, along with audio streamer Spotify and fitness brand Peloton had initially benefited from pandemic-induced lockdowns that led people to spend more time at home and more money online. But these companies’ fortunes have been reversed in a trajectory that knocked off their share prices throughout 2021.

Investors and customers are also slowly falling out of love with them amid much uncertainty worldwide.

While the price hikes will result in more complaints from customers, it did help iQiyi achieve its first-ever profitable quarter this year. The Beijing-based company, often hailed as the Netflix of China, repeated the same feat in Q2 2022, an Olympian task involving deep job cuts and regulatory action to curtail the industry’s excesses.

Price surges

This year, Chinese streamers have been following the same script as Netflix.

In early April, Tencent Video announced that it would charge more for its subscription plans – the second increase in less than 12 months. Based on the new pricing policy, a user now pays 50 yuan (around US$7.24) for a non-renewing monthly plan that includes TV streaming.

On average, non-renewing monthly plans from providers in China cost between 25 and 50 yuan (US$3.62 to US$7.24), depending on whether the plans are recurring or if TV mirroring is included.

While the plans appear to be a few dollars cheaper than offerings from their Western counterparts – Netflix and Disney+ charge US$9.99 and US$7.99, respectively, for their basic monthly plans – the US gross domestic product per capita is 6x that of China’s as of 2020.

Tencent Video isn’t the only one pulling up prices. In the past two years, almost all major Chinese streaming players have been asking more of their subscribers – some did so repeatedly – as content costs and competition mounted.

The turning point

From tree to orchard

Trimming errant branches