Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- iQIYI Inc (IQ, Financial) has successfully built a solid foundation of loyal, sticky members, which supports long-term membership growth.
- The company is extensively applying AI to improve content creation, operational efficiency, and user experience.
- iQIYI Inc (IQ) has regained market leadership in the key drama category with the release of acclaimed titles like Strange Tales of Tang Dynasty Season 2.
- The company is expanding its footprint in the broader overseas market, with solid performance and revenue growth in regions outside of Mainland China.
- iQIYI Inc (IQ) is exploring diversified revenue opportunities beyond membership and advertisement, such as IP derivatives and offline experiences.
Negative Points
- Membership revenue was down 9% annually, primarily due to fluctuations in the content slate performance.
- Total revenues decreased by 5% annually to RMB7.4 billion.
- Online advertising revenue decreased by 2% year over year, mainly due to fewer variety shows launched.
- The company faced intense competition for top content, which put pressure on financial results.
- Brand ad revenue was down annually, reflecting a decrease in variety show launches.
Q & A Highlights
Q: How does management view the current competition landscape for long videos and what's your strategy?
A: (Xiaohui Wang, Chief Content Officer) The intense competition within the industry helps improve the overall quality and richness of content, enhancing the competitiveness of long-form video compared to other entertainment forms. iQIYI aims to sustain a high-quality, diverse content supply and achieve a balance between content quality and commercial benefits. Despite fluctuations, iQIYI has maintained a leading position in drama and film categories. The strategy includes creating high-quality content tailored for mainstream and female audiences, optimizing content scheduling, and strengthening in-house studio management.
Q: How should we think about the prospects of membership growth in the future, especially subscribers and ARPU growth?
A: (Youqiao Duan, Senior Vice President) The cornerstone members represent a stable base, with fluctuations mainly from members attracted by new content. The focus will be on expanding membership scale and maximizing membership revenue. Proactive measures to optimize account sharing and combat piracy will support long-term growth.
Q: Can management share your latest thoughts on business strategy and plan for the overseas business?
A: (Xianghua Yang, Senior Vice President) iQIYI aims to boost revenue growth and increase profit in overseas markets. The strategy includes increasing content offerings, leveraging the popularity of Chinese dramas, and exploring local content production. Partnerships with local telecom operators will enhance brand awareness and content influence overseas.
Q: Can management share your strategy of unlocking the IP potential in different areas other than membership and advertising?
A: (Yu Gong, CEO) iQIYI aims to transform each piece of content IP into numerous revenue prospects, maximizing its value across different markets and platforms. The strategy includes leveraging IP for offline experiences, developing derivative products, and adopting a light asset approach for incremental revenue with limited cost.
Q: What are the key factors supporting the long-term outlook of the membership business?
A: (Yu Gong, CEO) Key factors include a solid foundation of loyal members, content as a primary driver of membership growth, and enhanced operational strategies for member acquisition and retention. Initiatives include expanding sales channels, launching marketing initiatives tied to popular content, and providing value-for-money services to long-term subscribers.
Q: How is iQIYI leveraging AI to improve content creation and operational efficiency?
A: (Yu Gong, CEO) iQIYI extensively applies AI to improve content creation, operational efficiency, and user experience. AI supports revenue forecasting, decision-making during project development, and advertising innovation. AI tools also enhance content production and marketing efficiency.
Q: What are the plans for content pipeline and future releases?
A: (Yu Gong, CEO) iQIYI plans to enhance the stability of premium content supply and fast-track productions of dramas targeting female audiences. Upcoming releases include a mix of ancient costume dramas, modern idol dramas, reality, and suspense genres. The variety show lineup will also see an increase in titles.
Q: How is iQIYI performing in the advertising business?
A: (Jun Wang, CFO) Total ad revenue was RMB1.5 billion, down 2% year over year. Performance ads grew healthily, while brand ad revenue decreased due to fewer variety shows. Technical advancements and AI tools have enhanced monetization efficiency and ad production.
Q: What are the financial highlights for the second quarter?
A: (Jun Wang, CFO) Total revenues were RMB7.4 billion, down 5% annually. Membership services revenue was RMB4.5 billion, down 9% annually. Online advertising revenue decreased by 2% year over year. Content distribution revenue grew 2% annually. Non-GAAP operating income was RMB501 million with a 7% margin. Operating cash flow was RMB411 million.
Q: What are the key initiatives for driving long-term growth?
A: (Yu Gong, CEO) Key initiatives include rolling out diversified premium content, applying innovative technologies, and enhancing team creativity and execution capabilities. The focus is on maximizing IP value through technical innovations and content creativity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
