Caixin
Sep 21, 2016 06:47 PM
BUSINESS & TECH

Video Operator iQiyi Shoots for Profitability as Soon as 2018

(Shanghai) – Video platform operator iQiyi Inc. is aiming to become profitable as early as 2018, its CEO said Wednesday, as cutthroat competition starts to ease and consolidation continues in an emerging Chinese sector that is suffering huge losses as it tries to challenge traditional TV stations.

The company, which is controlled by leading search engine Baidu Inc., has been fighting for much of the last three years for a share of China's online video market, whose flexibility of delivery and wider array of programs is quickly stealing business from older, traditional broadcasters. At the same time, iQiyi and rivals like Youku Tudou have yet to find formulas for long-term profitability due to consumer reluctance to pay for watching programs.

The company has seen its revenue grow sharply over the last three years, rising more than 80 percent to 5.3 billion yuan ($794 million) last year from 2014 as more Chinese consumers watched programs over the internet, according to Baidu's annual report. But the company's costs have grown even more quickly, and last year iQiyi posted a net loss of 2.4 billion yuan, more than double its loss from the previous year.

As competition finally starts to ease, the company hopes to become profitable as soon as 2018, and within three years at the latest, Gong said at an event at Fudan University in Shanghai. He also told Caixin his company is eying a public listing in either Hong Kong or New York, with the former the more likely destination. He declined to give a time frame for an IPO.

Reports of a spinoff and IPO for the company have appeared periodically over the last two years, as New York-listed Baidu comes under pressure from investors to spin off iQiyi and other money-losing businesses like take-out dining that are undermining profits from the company's highly lucrative core online search business.

Partly in response to those calls, Baidu reached a deal in February to sell its 80.5 percent of iQiyi to a group of private investors that included company founder Robin Li. But that plan ultimately fell through after the two sides failed to agree on a price. Gong said there are no current plans to revive the sell-off plan, but that an IPO is still the company's eventual aim.

"An IPO would achieve three objectives," he said. "It would raise the company's profile. It would also help to pay back some of our investors. And it would help us to raise more money."

Contact Doug Young at dougyoung@caixin.com; editor Ken Howe at kennethhowe@caixin.com

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