Caixin
May 19, 2021 06:30 PM
BUSINESS & TECH

IQiyi’s Losses Narrow as Streaming Platform Arrests Membership Decline

The share price of iQiyi Inc. climbed by more than 10% on Tuesday after the Chinese video-streaming platform posted better-than-expected first-quarter earnings.

The Nasdaq-listed company saw revenue rise 4.16% year-on-year to 7.97 billion yuan ($1.24 billion), according to its unaudited earnings report released before the market opened. The figure exceeded the average of analysts’ estimates, which was 7.67 billion yuan.

The Netflix-like firm more than halved its net loss to 1.27 billion yuan from 2.88 billion yuan in the equivalent period last year, the report said.

iQiyi’s stock briefly jumped more than 13% in intraday trading before closing up 10.28% at $13.95, its highest since May 6. The company’s share price has yet to recover from its collapse in March and April amid investor concerns that Chinese firms may face being delisted from American exchanges.

iQiyi attributed the robust results to a rise in subscriptions and 12% growth in revenue from membership services compared with the previous quarter, adding that the figures reflected the company’s heightened focus on high-quality video content.

“The notable growth was largely a result of our strong content launch … including dramas, variety shows and films during the quarter,” said Gong Yu, iQiyi’s founder and CEO, citing the popularity of hit drama “My Heroic Husband” as proof that the firm’s exclusive content strategy is working.

Revenue from membership services hit 4.31 billion yuan in the first three months, up 12.4% from the previous quarter but down 7% from last year. iQiyi said the year-on-year decline was due to the loss of members who signed up during China’s initial Covid-19 outbreak, when nationwide lockdowns caused people to spend more time indoors.

iQiyi had 105.3 million subscribers at the end of March, some 13 million fewer than the end of the same month last year, the company said. Still, the figure arrested successive quarter-on-quarter falls in subscriptions in the previous two quarters, which saw the company cede its position as China’s most-popular paid video service to one operated by Tencent Holdings Ltd.

In a letter to shareholders on Tuesday, Gong wrote that the issues with membership growth were mainly due to a “lack of high-quality content” caused by a decline in the amount of videos that iQiyi can license through traditional channels as well as problems with the quality and quantity of the company’s self-produced videos.

iQiyi plans to add to its approximately 50 in-house studios over the next two years in an effort to improve and diversify its self-produced content, Gong wrote.

The heartening quarterly results came after the streamer issued an apology earlier this month following a public outcry over online videos showing fans of one of its popular idol shows pouring dairy products down the drain.

The clips, which emerged during a national crackdown on food waste, inspired a stern editorial from state news agency Xinhua and called attention to the fine balance Chinese streaming platforms must strike between attracting viewers and staying in the regulator’s good books.

In a separate earnings report on Tuesday, iQiyi’s parent company Baidu Inc. reported that its quarterly revenue spiked 25% year-on-year to 28.1 billion yuan, compared with the 25.7 billion yuan average of analysts’ estimates. The search giant’s income was bolstered by a rise in the value of long-term investments like short-video platform Kuaishou Technology.

Contact reporter Matthew Walsh (matthewwalsh@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

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