Balancing short and long-term, can iQIYI 迎来 a second spring?

Author | Huang Yu

Editor | Wang Xiaojun

In the past year, the long drama industry has faced fierce competition, while the micro-short drama market has been thriving. Against this backdrop, as a leading long video platform, iQIYI also laid down its burdens in the second half of last year and began to fully embrace micro-short dramas.

On February 18, iQIYI released its fourth quarter and annual financial report for last year, marking the moment for the acceptance of its strategic adjustment's phased results.

iQIYI's founder and CEO Gong Yu stated that the micro-drama business has achieved a phased breakthrough. Although still in its early development stage, micro-dramas have shown great potential in increasing advertising inventory and enhancing advertising revenue. Additionally, since the fourth quarter of last year, iQIYI's high-quality long video content has made a strong comeback, with the content popularity values of the two series "I Am a Criminal Police Officer" and "Bleach" breaking ten thousand consecutively.

However, the stagnation in membership growth lagged behind the recovery of content, which also led to iQIYI's performance in the fourth quarter of last year remaining under pressure. Financial report data shows that in the fourth quarter of last year, iQIYI's total revenue was 6.61 billion yuan, a year-on-year decrease of 14%, and non-standard operating profit fell by 56% year-on-year to 410 million yuan.

However, analysts at Huatai Securities believe that although iQIYI's short-term revenue growth is under pressure, they expect the company to leverage its long-term industry insights accumulated from deep cultivation in the video sector, actively adjust its operational strategies to cope with fierce market competition, and help stabilize and rebound its fundamentals gradually.

In 2025, the video industry will face even more intense competition. To maintain its leading position, iQIYI must implement stronger measures to win this battle.

Turning Point

With the intensifying industry competition and the aggressive rise of micro-short dramas, long video platforms have faced pressure of reaching a growth ceiling in recent years.

As the only independently listed platform among "iQIYI, Tencent Video, Youku, and Mango TV," iQIYI's performance has always been regarded as a barometer for industry development.

However, last year was not easy for iQIYI. Financial reports show that in 2024, iQIYI's total revenue was 29.23 billion yuan, down 8% from 2023. The net profit attributable to iQIYI was 764.1 million yuan, while the net profit for 2023 was 1.93 billion yuan.

Additionally, iQIYI achieved a Non-GAAP operating profit of 2.36 billion yuan last year, with a Non-GAAP operating profit margin of 8%. Although this was a decline from 3.6 billion yuan in 2023, it still marked three consecutive years of operational profitability.

In terms of specific revenue, membership service revenue remains iQIYI's pillar income, reaching 17.76 billion yuan for the entire year, but down 12.5% from 2023. Furthermore, iQIYI's online advertising service revenue was 5.71 billion yuan, content distribution revenue was 2.85 billion yuan, and other revenue for the year was 2.9 billion yuan.

The decline in iQIYI's revenue largely aligns with market expectations. Throughout the year, although iQIYI continuously produced three hit series, "Chasing the Wind," "The Tang Dynasty's Strange Stories: Westward Journey," and "I Am a Criminal Police Officer," its competitors also performed impressively last year, putting pressure on its membership revenue growth Last year, Tencent Video aired nearly ten blockbuster series, while Youku, which was once considered the weakest among "Aiteng Youmang," returned to the spotlight thanks to the hit series "Mo Yu Yun Jian." In the second half of the year, it launched several well-received series such as "Bian Shui Wang Shi," "Zhu Lian Yu Mu," and "Bai Ye Po Xiao."

Mango TV, which has a unique advantage in self-produced variety shows, saw the launch of "Singer 2024" and "Goodbye Lover 4," both of which became phenomenon-level hit variety shows. Even in some "lagging" series content, it produced the hit "Xiao Xiang Ren Jia."

Despite fierce market competition, iQIYI maintained its position as the leading long video platform in terms of monthly active users. According to Quest Mobile data, in August 2024, iQIYI and Tencent Video had monthly active users of 394 million and 386 million, respectively, while Mango TV had about 268 million, Bilibili had about 219 million, and Youku had only 199 million.

From the more closely watched membership numbers, iQIYI's average daily subscription membership size has decreased from 129 million in the first quarter of 2023 to 100.3 million in the fourth quarter, and it stopped disclosing membership numbers last year.

However, Gong Yu revealed: "Since the end of November 2024, we have launched a series of blockbuster works that have driven a strong rebound in performance, consolidating our market leadership position. According to Yunhe data, iQIYI's total market share in series in the fourth quarter ranked first. With the launch of more blockbuster works, we have continued to see a gratifying growth momentum at the beginning of the year, with subscription members significantly increasing from the end of 2024 to now."

Future

Long video content is the foundation of iQIYI's development, but in the past year, short dramas have become "electronic pickles" for an increasing number of internet users, with their strong monetization ability attracting more entrants, including the previously cautious iQIYI.

At the 2024 iQIYI iJOY Autumn Enjoyment Conference held last September, iQIYI announced its formal entry into the micro-short drama field.

According to iQIYI's blueprint, the "Micro Theater" will focus on male and female audiences as well as the elderly demographic, launching two new works each week, featuring vertical screen content of 1-5 minutes; while the "Short Theater" plans to update one new work each week, covering various genres such as historical romance, contemporary romance, and suspense, with each episode lasting about 5-20 minutes and presented in horizontal format.

On January 13 of this year, iQIYI announced a deep cooperation with Hongguo Short Drama, the most dynamic short drama platform today, to initiate joint IP development, co-production, and content licensing, jointly launching more high-quality micro-short dramas.

On the evening of January 24, iQIYI announced the launch of the micro-short drama Spring Festival schedule, with 28 micro-dramas premiering on the iQIYI APP and iQIYI Lite APP from January 28 (New Year's Eve) to February 4 (the seventh day of the Lunar New Year).

The major entry into the short video industry not only marks iQIYI's further expansion in content ecology but also signifies that iQIYI will no longer be just a long video platform in the future, but a "dual-track" streaming platform.

The capital market's assessment of iQIYI is no longer limited to traditional long video content; the layout and progress of micro-short dramas have become an important part of its evaluation system The paid micro-short drama market contains enormous potential. According to the "China Internet Audio-Visual Development Research Report (2024)," 39.9% of internet users frequently watch micro-short dramas, and 31.9% have paid for micro-short drama content.

Additionally, data from the DataEye Research Institute indicates that the market size of micro-short dramas in China is expected to reach 50.4 billion yuan in 2024, surpassing the box office revenue for the first time. It is projected to exceed 68 billion yuan in 2025 and is expected to break 100 billion yuan by 2027.

Currently, iQIYI's micro-short drama products and infrastructure development have been largely completed, and it will continue to strengthen content supply, distribution, and user mindset cultivation. iQIYI announced that in December, a micro-drama project achieved over one million in revenue in a single month, while the short drama "Original Sin" generated over 24 million yuan in box office revenue.

Analysts at CMB International pointed out that considering the recovery of content supply stability, iQIYI's membership is expected to gradually bottom out and rebound by 2025, which is likely to bring marginal financial improvements. The current price corresponds to a price-to-earnings ratio of only 6.6 times for 2025, close to the historically lowest valuation level, maintaining a buy rating. Attention should be paid to the contribution of micro-short drama layout to commercial growth.

"In 2024, we successfully promoted business development by actively embracing a series of changes and innovations, setting a good foundation for 2025," said Gong Yu during the earnings call. The strong return of high-quality long videos and continuous innovation in the micro-drama field will become the dual engines driving sustained growth in 2025.

The competition among long video platforms has entered a new phase. Those who can continuously produce hit long dramas while capturing users' interest in short dramas are likely to open up new growth opportunities