China’s second-largest streaming video platform iQiyi posted steeper net losses amounting to RMB 1.7 billion (USD 268.4 million) in the third quarter, compared to RMB 1.2 billion (USD 188 million) a year earlier, performing slightly better than market expectations. Total revenue improved by 6% to reach RMB 7.6 billion (USD 1.2 billion), mostly in line with analyst expectations of USD 1.19 billion.
iQiyi’s share price has since slumped after the company reported its Q3 financial results, closing at a decline of more than 17% at USD 7.11 on Wednesday. In March 2018, iQiyi’s IPO price was USD 18 price per share.
“During the third quarter, we experienced significant uncertainty in terms of content scheduling, which resulted in softer than expected top-line performance,” said Yu Gong, founder and CEO of iQiyi. “We expect the uncertainty to largely remain, so we are proactively adapting ourselves to the new market environment. We are determined to continue improving the efficiency of our operations as we execute our diversified content strategy.”
Membership revenue improved to reach RMB 4.3 billion (USD 665.5 million), an 8% increase year-on-year. However, there were 103.6 million total subscribers as of September 30, 2021, including users on trial memberships, down from 106.2 million as of June 30, 2021, and 104.8 million from the period in 2020.
iQiyi’s declining subscriber numbers suggests it is losing ground to competitors like Bilibili, Douyin, and Kuaishou. Bilibili’s paying users grew 56% YoY to 23.9 million in Q3 2021. Its average monthly active users reached 267.2 million, an increase of 35% from the same period in 2020, according to Bilibili’s Q3 results released on Wednesday.
More worrying is the tough regulatory environment for China’s entertainment industry. iQiyi had to terminate production for competition-based and K-pop style variety shows to comply with the authorities’ displeasure with “excessive fan culture” in the country.
On a conference call following the results, iQiyi’s management attributed the company’s losses to a shortage in content supply and the emergence of short video platforms. The number of newly launched movies and series has been cut by more than 50% during Q3 as a result of the COVID-19 pandemic and stringent regulatory censorship, iQiyi’s management said.
Revenue from advertising was down 10% YoY to RMB 1.7 billion (USD 257.7 million), primarily due to the lower volume of premium content that was launched during Q3 and a challenging macroeconomic environment in China.
For the fourth quarter, iQiyi expects its total net revenue to be between RMB 7.08 billion and RMB 7.53 billion (USD 1.10–1.17 billion), indicating an outlook for as much as a 5% decrease YoY.
“We will continue to improve the efficiency of our operations, and remain cautious with our investments in content. In the long term, we will continue to grow our portfolio with diversified content and develop innovative new products and services with better ROI,” said Xiaodong Wang, CFO of iQiyi.
