IQiyi posts first year of profits, says it’s ‘excited’ about AI like Sora

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A view of iQiyi’s website featuring various TV shows taken on Tuesday, August 22, 2023.

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Beijing – Chinese video content and streaming company iQiyi CFO Wang Jun said he is “excited” about potential new business opportunities with the emergence of OpenAI’s text-to-video tool Sora.

Speaking exclusively to CNBC on Thursday, Wang said such tools could help iQiyi tell stories more creatively, and that internally, it is exploring the text-to-video space although it doesn’t work with Sora.

But Wang suggested that the tech’s capabilities are still not able to offer people what they want. “We are waiting for that moment,” he said.

OpenAI, the maker of artificial intelligence-powered chatbot ChatGPT, unveiled Sora earlier this month. Wide public access to the tool, which appears to create cinematic scenes based on text prompts, remains limited.

Wang’s comments come as iQiyi reported on Wednesday that it had turned a profit in 2023 for the first time since listing in the US in 2018. Almost every year since then, the company has posted an annual loss of $1 billion or more.

After major efforts to improve performance in 2022, iQiyi came close to breaking even. Net income finally turned positive in 2023, with a total of $271 million.

Wang said IQiyi’s strategy is not “brave”, but a meticulous approach integrated with big data analysis using technology and AI.

Wang said the first step was to attract the best talent in China’s film industry.

That involved moving IQiyi’s headquarters in late 2019 from a tech hub on the northwest outskirts of Beijing to a central location in the eastern part of the city, where more creative people live or already work.

The new office is in a popular neighborhood called Senlitan, which is home to an Apple flagship store, an upscale outdoor shopping complex, and several restaurants and bars.

Wang pointed out that the Sanlitan office layout is also flatter than the tower the company previously occupied, allowing more people to work on one floor and interact organically. He added that the rent at the new location is cheaper.

IQiyi produces its own television dramas and reality shows and licenses movies for its video platform which is available as a smartphone or television application or on its online website.

For 2023, iQiyi said on Wednesday that its original content accounted for a record 65% of the major dramas it released.

The company claims that it now has more than 50 in-house studios that produce more than 200 shows a year.

The growth of in-house production reflects a major shift in China’s film industry over the past five years, Wang said, adding that previously most content was produced by third parties, resulting in bidding wars for shows that drove up costs.

Other major Chinese video platforms with long-form content include Tencent video, Ali Baba– Youku and owned Bilibili.

Another aspect of iQiyi’s strategy, Wang said, is using a centralized platform to analyze customer preferences.

The data, of which the company now has five years’ worth, allows it to determine what types of viewers watch during the summer holidays, for example, and which director or producer involvement contributes most to success.

Recent data insights show that more people across China are watching iQiyi’s content on Internet-connected television sets and, increasingly, on screens inside electric cars, Wang said.

Finally, he said the company is making a targeted effort to ensure returns on production projects rather than pouring funds into one big project with a famous director or cast.

Decrease in number of subscribers

Despite iQiyi’s record revenue, net income and cash flow in 2023, the company’s total average daily number of subscribers fell to 100.3 million in the fourth quarter, from 111.6 million for the same period a year ago and 107.5 million in the third quarter.

Monthly average revenue per membership rose to 15.98 yuan ($2.25) in the fourth quarter, up from 15.54 yuan in the third quarter and 14.17 yuan in the fourth quarter of 2022.

When asked about subscriber numbers, Wang said 100 million still indicates the company is reaching several hundred million people per month because each subscription can represent a household. But it admitted that there was pressure to produce better content to bring subscriber numbers back up to the levels seen during a hit television drama series in early 2023.

IQiyi, whose parent is a Chinese tech company BaiduIt has also long eyed markets outside of China and has a presence in Southeast Asia.

Wang said overseas expansion would remain a focus in the coming year, but declined to share specifics.

“We’ve seen the successful example of Netflix, we’ve seen the global success of Disney, and we know that at some point quality content will be appreciated,” he said, adding that sentiment motivates the team as a whole.

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