iQiyi raised its revenues by 51% in Q2 2018

China’s leading content distribution and entertainment platform iQiyi released its second quarter fiscal results since it landed in Nasdaq in March. The company showed good potential and is narrowing down its losses, despite its CEO Gong Yu saying it’s still not likely for iQiyi to profit even by the release of the next quarterly results.

Performance Data

The unaudited results for the second quarter ending with June 30, 2018 suggest a 51% rise of total revenues hitting RMB 6.2 billion ($932.5 million) compared to the same period last year.

The total number of subscribers reached 67.1 million, a 75% YoY surge. Paying subscribing members account for 98.7% of the total members. Aside from subscriptions, the largest sources of revenue in Q2 were membership services (40.3%) which include advertising. The World Cup, according to iQiyi CEO Gong Yu, hugely boosted advertising revenues.

The company’s net loss increased from the first quarter’s RMB 397 million to this period’s RMB 2.1 billion. But iQiyi has reduced its operating loss margin from 24% to 22% compared to the same period last year, despite that it still suffered an RMB 1.3 billion operating loss for the period.

iQiyi’s 100% acquisition of Chengdu-based Skymoons digital entertainment company and mobile game producers would also absorb RMB 2 billion worth of capital assets. iQiyi announced to have completed the deal on July 18. It needs time to see results.

iQiyi’s own content production

Gong said in a phone investors’ conference (in Chinese) held after the release that iQiyi’s strategy is to increase investment into high-quality content in the coming few years. He also stresses the focus on iQiyi’s own shows. The company’s talent show The Rap of China has brought huge traffic and proved massive commercial potentials.

iQiyi is leveraging their AI for editing and casting. Starring roles will still be decided by humans

Self-made content will also grant iQiyi more independence and this is a general trend in the content industry as Netflix already noted.

Policy and cost 

Meanwhile, Gong says the company is also closely following any state policy to monitor and manage entertainment shows’ KOLs and celebrities’ incomes. The Chinese government has long been criticizing some shows for paying unreasonably high rewards to celebrity participants.

Gong hasn’t explicitly confirmed whether the policy signal would result in any substantial financial cost changes. In terms of TV shows, live-streaming companies such as iQiyi, Tencent Video, and Youku released a statement to suggest potential solutions. Gong explains that the statement is more like an advocacy that has no legal enforcement power.