Yahoo News IQiyi’s Yang Xianghua Talks Global Rollout, Profitability and How AI Is Improving the Chinese Streamer’s Hit Rate: ‘Smart Controls Cover Our Entire Content Lifecycle’ (EXCLUSIVE)
Chinese video streamer iQiyi used the Asia Television Forum & Market in Singapore to unveil a slate of productions and commissions by its international division, celebrate a partnership with Singapore-based Chinese-language studio GHY Culture Media, and renew a deal with the Singapore Tourism Board.
President of movies and overseas business Yang Xianghua sat down with Variety and shed light on the company’s improving profitability, its lower costs and the integration of artificial intelligence (AI).
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What has been your mission during ATF week?
My goal here has been to introduce our international business and show what we are doing locally, how we are producing locally.
The iQiyi app is available around the world. But you don’t support it the same way everywhere. And you have local production in only some. Could you explain the patchwork of international operations?
Our goal is to become the home of beloved Asian content, which differentiates us from U.S. streaming players, which are big with western content and have some Asian content. Our target is to be an Asian content company, with Chinese-language within that, but also Japanese animation, Korean content and local too.
We are an app, we a platform supported by our high technology. In this, we are very advanced, competitive with other brands. From things like the high-quality video to its fast-loading speed.
We introduce content worldwide. We do subtitles and dubbing ensuring that our content can work very easily.
We need local content to serve the local audiences in Thailand and Malaysia. We need to do more in local content in order to target a mass audience in each market, not just the top or premium levels.
In which countries are you producing locally? And are those the same countries where you are currently supporting?
Every country can download our app. And we have 12 different languages of subtitle including English, Thai, Bahasa Malaysia, Indonesian, Japanese, Korean, Spanish and Arabic. But for local content production we are only active in limited markets: Thailand, Malaysia and Taiwan.
Our first-year target is to be in Southeast Asia, East Asia and have some presence in North America. North America is already a big market for us in revenue terms. We have local offices in Singapore, Bangkok, KL and Toronto for North America. We have Arabic subtitles, but we don’t have a team there.
Subscription numbers seem to have plateaued, but profitability has grown, while iQiyi is spending less on content. How are you able to drive revenue, increase profits and spend less on content at the same time?
Our strategy in recent years is to achieve high quality growth. First that means be profitable. Second it means achieving revenue growth. Not just subscriber numbers. Subscriptions is only one index. And subscriber revenues have three components: first, subscriber numbers. Second, is their duration. Third is average revenue per subscriber. We focus on improving different things at different times. Recently we’ve been concentrated on ARPU and that is still going up.
On the cost front we aim to produce more high-quality content. That is not the same thing a big budget content. We have a lot of systems and methods to guarantee the blockbuster ratio. We rate our content A, B or C. And over the last seven years we’ve operated a hot index where a score of 10,000 is a blockbuster. We’ve had ten of those over the last three years. Five last year and four already this year.
Budgets grew a lot in China over five years, but for the last two years they have been mostly flat.
We have over fifty in-house production teams. They are experienced, and they know our users know the audience of China.
Second, we have an AI-based smart production system. This controls production, post-production and marketing – the whole lifecycle of our content. These two things guarantee that our blockbuster ratio is higher than our competitors. Every platform is basically the same, but we have a higher blockbuster ratio.
How much of your content is now being produced outside of mainland China and how much of that can be released in China?
In these three market (China, Thailand, Malaysia) we produced 10 to 30 series seasons every year. Within China we control most content ourselves. Outside of China, some of them will be our productions. Some will be acquired exclusively. We call them originals, meaning that the content is exclusively for us in the market and branded as iQiyi. Some of them will be broadcast in China, some of them not.
Making shows like Boys Love series in Thailand (which cannot be shown in China) is that economically viable. Is it just an experiment?
It is not an experiment. We take local content seriously. If we produce in Thailand, our main audience will be Thai people. If we can show it in other markets including China, that would be a bonus. Our first goal is to make sure that we produce content and make money in the local market, whether it’s China, Thailand or Malaysia.
iQiyi operates three tiers of paid membership and a free tier. How is content used to differentiate those layers?
In the Chinese market, we have spent years trying to convert free users into paying users. In the U.S. market, other platforms are now going from a paid-for model to a lower price market. Maybe they are learning from us.
In China we have managed to increase our subscription prices and our APRU. But our largest user base is still free users. We have over 100 million paying subscribers and we have over 500 million monthly active users. The bulk of them are free. These are the mass audience, typically in lower tier cities.
In some cities, some people are willing to pay for better quality audio or higher definition image and better service.
The release window is the main difference between them. The paying subscribers can watch content earlier, between 24 hours and a week ahead of the free tier. Free users can watch and [endure] lower quality. Paid users can watch the 4k or 1080 picture and top audio. They can also have some offline benefits, such as coupons from our many commercial partners.
The Chinese and the international streaming industries have little overlap, yet have undergone similar business cycles, notably a post-COVID focus on profitability, not growth.
Streaming in no longer an early-stage industry. It has become mature. It is no longer ‘new media,’ but has become the dominant media in almost every country. That means it also has to be a profitable industry. That’s the same worldwide.
Competition for eyeballs comes from other media such as short video, gaming and live-streaming, which is particularly highly developed in China. How are you fending them off?
They’re all entertainment services competing for users’ time. On one hand there is culture and high-quality content worth paying for. Gaming and other forms are free and ad-supported. Short video is taking time from almost all other forms of entertainment, but in China at least, its growth has slowed down. Rapid growth followed by slowdown and stability is a familiar life cycle.
How are you planning to expand your international business over the next three years?
We are sticking to the same strategy of high-quality growth and profitability. We will try to open our service in some new markets. But I can’t say which ones yet. This is a big challenge for us. We have to know the culture and know the market.
Also, the Chinese market is big and growing quickly. More and more foreign audiences are interested in the Chinese people’s daily lives and different aspects of Chinese society.
So, does that mean that there will be more growth from reality-based contemporary shows, rather than Chinese historical dramas with scores of episodes?
There will be both. Chinese romantic dramas are quite popular around the world. Chinese society has such a long history. Few countries in the world can do costume dramas over so many different dynasties and styles.
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