Beijing-based, Baidu-founded iQIYI provides original and licensed media content based on a 'freemium' model, with subscribers now exceeding 100 million following a strong 2020. This year's economic recovery in China has also boosted advertising budgets.
On May 18, 2021, iQIYI (Nasdaq: IQ) filed its earnings report for the first quarter ending March 31, 2021. Membership services revenue was CNY 4.3 billion (US$658.1 million), up 12 percent year-over-year. During the quarter, iQIYI also achieved a net growth in membership size of 3.6 million. This was mainly due to the strong performance of headline content, especially premium series content, and the impact of the holiday season, which continued to drive membership growth.
In the first quarter, the company’s advertising revenue was CNY 1.9 billion (US$292.5 million), up 25% year-over-year, as brand advertising budgets and brand advertisers rebounded because of the economic recovery. In addition to membership and advertising revenue, iQIYI's content distribution achieved revenue of CNY 779.1 million (USD $118.9 million) in the quarter, up 29% year-over-year, as it distributed more content to other platforms during the quarter. Other revenue contributed CNY 961.0 million (USD $146.7 million) in the first quarter, an increase of 10% compared to the same period last year.
In the first quarter of 2021, iQIYI's cost of revenue decreased 10% compared to the same period in 2020, primarily due to lower content costs and bandwidth costs. Content costs in the first quarter were CNY 5.4 billion (USD $829.6 million), down 8% compared to the same period in 2020. The decrease in content costs was primarily due to lower copyrighted content costs.
iQIYI reported an operating loss of CNY 1.0 billion (approximately USD $154.8 million) in the first quarter, with the operating loss ratio shrinking to 13% compared to 29% in 2020. As of March 31, 2021, the company had cash, cash equivalents, restricted-use cash and short-term investments totaling CNY 13.3 billion (approximately USD $2 billion). iQIYI's outlook for the second quarter of 2021: total revenue is expected to be between CNY 7.21 billion (approximately USD $1.1 billion) and CNY 7.65 billion (approximately USD $1.17 billion).
"We kicked off the quarter with a well-rounded, solid performance," said Dr. Gong Yu, the chief executive officer of iQIYI. "Our subscriptions grew by 3.6 million in the first quarter, and membership services revenue increased by 12 percent sequentially. These performances reached their peaks since last year. This significant growth is due in large part to the launch of our genre-rich drama, variety, and movie content during the first quarter. In particular, the drama series 'My Heroic Husband' became another benchmark in terms of ratings and monetization efficiency, which confirms our exclusive content strategy. On April 22, we celebrated our 11th anniversary as a company. After we have undergone intense competition in the Chinese online video market, we have enough confidence to maintain our leading position. We firmly believe that long videos are irreplaceable as an entertainment format, and we are well prepared for the opportunities and challenges ahead."
"Total revenue in the first quarter exceeded our previous expectations and delivered healthy growth both sequentially and year-over-year," Mr. Wang Xiaodong, the Chief Financial Officer of iQIYI, said. "During the quarter, we launched several popular content titles, while investment efficiency improvements helped drive content costs down year-over-year for the third consecutive quarter. We will continue to focus on profitability to drive growth across our businesses, including content, technology and marketing. This will ensure the company’s sustainable growth for the long run."