Chinese video streaming site iQiyi achieved an annual profit for the first time in 2022, according to its earnings report posted on Wednesday. The Baidu-backed long-video platform posted a non-GAAP net profit of RMB 1.3 billion ($186.2 million) and a 5% fall in revenue from the previous year to RMB 29 billion.

The Nasdaq-listed company is eyeing “high-quality growth” in 2023, aiming for simultaneous growth in operating profit and revenue, its CEO Gong Yu said in a related earnings call.

Why it matters: iQiyi has been losing money since its founding in the early 2010s. Its current profitability is largely thanks to aggressive cost-cutting since the end of 2021, fine-tuning content production, and new subscriber growth. Its competitors Tencent Video and Youku have yet to turn an annual operating profit.

Details: iQiyi managed to decrease its revenue costs by 19% in 2022. The platform produced a number of widely popular original video series, and grew its members to 120 million, offsetting some of its losses in ad revenue as the content business as a whole saw less ad expenditure last year. 

  • Membership service revenue — the primary revenue source for iQiyi, accounting for 60% of its revenue — increased by 6% to RMB 17.7 billion. Meanwhile, the company’s revenue generated by online advertising services and content distribution decreased by 25% and 14%, respectively.
  • The continuing cost-cutting measures have contributed to a significant reduction in iQiyi’s expenses, with both administrative expenses and R&D expenses falling more than 20% in 2022.
  • iQiyi’s subscription membership grew by more than 10 million in the fourth quarter of 2022, and its total number of subscriptions was close to 120 million by the end of December.
  • Some of iQiyi’s video series that reached a wide audience in 2022 include A Lifelong Journey, Love Between Fairy and Devil, New Life Begins, and Wild Bloom.
  • Earlier this year, the video site also received acclamation for its original series The Knockout. Executives believe the success of the hit drama is replicable, saying leading original content production ability and operational capability are key to iQiyi’s competitive strengths. Streamed last month, The Knockout followed a fictional hunt for corrupt local officials and has garnered more than 300 million views. 

Context: Although The Knockout has proven an early 2023 hit for iQiyi, the steaming site has faced multiple controversies over membership rights in recent months.

  • The growth in iQiyi’s membership service revenue is due in part to subscription fees rising over the past three years, with increases ranging from RMB 3 to RMB 20, a move that spurred rivals Tencent Video, Youku, and Mango TV to follow suit.
  • Facing criticism from a government-backed consumer council and a lawsuit by one of its users, iQiyi dropped a plan to restrict access to high-definition screens among its paid members unless they paid an extra fee for the service.
  • On Feb. 15, iQiyi announced that it would incorporate Baidu’s artificial intelligence chatbot Ernie Bot into its content search, promotion, and novel creation services.

Cheyenne Dong is a tech reporter now based in Shanghai. She covers e-commerce and retail, AI, and blockchain. Connect with her via e-mail: cheyenne.dong[a]