With the initial successes of cost optimization, iQIYI announced its 2021 financial report with a clear company goal -- to break even as early as possible
iQIYI, an innovative video-streaming platform in China, saw its revenue rise to CNY 30.6 billion (USD 4.82 billion) in the fiscal year 2021, up 3% year on year (YoY).
Despite the revenue growth, the earnings remain negative with an operating loss of CNY 4.5 billion and net losses of CNY 6.2 billion.
Starting from the fourth quarter of 2021, the company has launched a series of initiatives to optimize its cost and improve its organizational alignment, which resulted in a 4% YoY shrink in the cost of revenue (CNY 6.5 billion), 5% YoY decrease in content costs (CNY 4.9 billion) and a 17% reduction in sales, general and administrative expenses (CNY 1.1 billion).
Meanwhile, the number of subscribers trended lower, slipping from 102.7 million in 2020 to 97 million.
Given the decline in subscribers, it's noteworthy that iQiyi was able to secure continuous revenue growth from its existing customers thanks to soaring monthly average revenue per membership (ARM), from CNY 12.45 in Q4 2020 to CNY 13.65 Q3 2021 and to CNY 14.16 Q4 2021.
Beijing-based, Baidu-backed iQIYI provides original and licensed media content, with its main revenue mainly coming from four segments including subscription, online advertisement and content creation and other areas it didn’t specify.
In Q4 2021, subscription revenue amounted to CNY 4.1 billion, up 7% YoY, continuing to be the largest pillar for its business (55% of the total revenue). This growth is primarily driven by increased ARM associated with membership pricing adjustment and various initiatives to improve monetization capabilities.
Online advertising revenue was CNY 1.7 billion, down 10% YoY, primarily due to the delayed release of premium content during the quarter and the challenging macroeconomic environment in China, according to media reports.
Content distribution revenue dropped to CNY 761.5 million, down 5% over 2020.
After decades of experience and struggle, iQIYI has become the top video-streaming platform in China. The MAU of iQIYI, Tencent and Youku, the three major players, in December 2021 were 548.42 million, 423.6 million, and 461.56 million, respectively.
With Tencent and Alibaba expanding into the battlefield of content creation and copyright purchases, the top-tier position of iQIYI is being shaken to some extent. Amid this highly competitive market, iQIYI has changed its business goal to breaking even as early as possible.
"We would like our shareholders to recognize that iQIYI is opening a new chapter in the Chinese long-form video industry," commented Yu Gong, founder, director, and chief executive officer of iQIYI. "Our goal is to reach non-GAAP operating break-even for the full year of 2022 and to reach quarterly non-GAAP operating break-even as early as possible, while maintaining our competitive advantage as the industry leader. I am delighted to see that we are moving in the right direction."