Baidu-Backed Streaming Platform iQIYI Records Full-Year Profit

According to the financial report released by Baidu’s Netflix-style offshoot iQIYI on February 22, the company recorded a 2022 revenue of 29 billion yuan ($4.2 billion), down 5% year-on-year. Non-GAAP net income attributable to iQIYI was 1.3 billion yuan ($186.2 million), compared to its non-GAAP net loss of 4.5 billion yuan ($653 million) in 2021.

iQIYI‘s stock jumped by 9% on this news early February 22, but dropped back to trading at $7.32 per share by the end of the day.

As of December 31, 2022, iQIYI had 120 million subscribers. Income from subscription fees was 17.7 billion yuan ($2.6 billion) last year, up 6% year-on-year. Meanwhile, its advertising revenue was 5.3 billion yuan ($770 million), down 25% year-on-year.

“We wrapped up a remarkable year of turnaround with outstanding performance in the fourth quarter. Our drama market share reached a historical high, according to Enlightent. So were our membership revenues, operating profits, operating cash flow, and free cash flow,” commented Gong Yu, Founder, Director, and Chief Executive Officer of iQIYI.

Gong mentioned in a letter to investors that “2022 was a year of breakthroughs, a miraculous year for iQIYI as it completed an iconic turnaround under extremely volatile market conditions.”

From 2018 to 2020, iQIYI‘s net losses were 9.1 billion yuan ($1.3 billion), 10.3 billion yuan ($1.5 billion), and 7 billion yuan ($1 billion), respectively. At the end of 2021, iQIYI started to lay off employees and reduce spending. It also increased the efficiency of content production, procurement, and operation, and reduced the variety of shows on the platform. According to iQIYI‘s 2021 annual report, its total number of employees at year end was 5,856, down by nearly 2,000 compared to 2020.

Over the past year, iQIYI featured many hit dramas such as “A Lifelong Journey”, “Love Between Fairy and Devil”, “Chasing the Undercurrent”, “New Life Begins”, and “Wild Bloom”, covering reality, fantasy, suspense, youth, and other genres. At the beginning of this year, “The Knockout”, a crime drama, earned an impressive 8.5 points on Douban, China’s social review platform.

A poster of “The Knockout”, a crime drama (Source: iQIYI)

In the current market, the success of a video streaming platform depends on its ability to consistently produce hit shows and draw in viewers. In his letter to shareholders, Gong said that “The Knockout”, which broke multiple records across platforms, confirmed the validity of the business cycle. That is, “by providing high-quality content that attracts membership growth, a larger subscriber base then allows for cost-efficiencies and increased profit, which in turn supports the production of more high-quality content.”

Gong attributed iQIYI‘s profit to an investment of nearly 20 billion yuan ($2.9 billion) in original show production over the past two years. Of all new popular dramas each year, the proportion of original series has increased from 20% in 2018 to over 50% in 2022.

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Gong also announced that in the past 12 months, iQIYI has completed three funding rounds that raised a total of nearly $1.3 billion.

Baidu, a shareholder of iQIYI, released its financial report on the same day and announced that it would launch a large language model called Ernie Bot. The potential of AI-generated content (AIGC) has been widely discussed recently. According to Gong, since mid-2022, iQIYI has begun to explore the application of AIGC in the film and show industry, including script creation and smart video production systems.