A view of iQiyi's website showing a TV variety show, taken on Tuesday, August 22, 2023.
Bloomberg | Bloomberg | Getty Images
Beijing – Chinese video content and live streaming company iQiyi CFO Wang Jun said he was “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 it is internally exploring the text-to-video space even though it doesn't work with Sora.
But Wang pointed out that technology's capabilities are not necessarily yet able to deliver what people want. He added: “We are waiting for this moment.”
OpenAI, the creator of its AI-powered chatbot, ChatGPT, unveiled Sora earlier this month. Widespread public access to the tool, which appears to create cinematic scenes based on text prompts, remains limited.
Wang's comments come as iQiyi announced on Wednesday that it turned profitable in 2023 for the first time since its US listing in 2018. In almost every year since then, the company has posted annual losses of $1 billion or more.
After making a huge effort in 2022 to improve performance, iQiyi is close to breaking even. Net income finally turns positive in 2023, totaling $271 million.
Wang said IQiyi's strategy is not “bold”, but a careful approach integrated with big data analysis using technology and artificial intelligence.
Wang said the first step was to attract the best talents in the Chinese film industry.
This included moving IQiyi's headquarters in late 2019 from a technology hub in the northwestern suburbs of Beijing to a central location in the eastern part of the city, closer to where more creative people already live or work.
The new office is located in a popular neighborhood called Sanlitun, which is home to Apple's flagship store, an upscale outdoor shopping complex and several restaurants and bars.
Wang noted that the Sanlitun office's design is flatter than the tower the company previously occupied, allowing more people to work on one floor and interact organically. He added that rent at the new location was cheaper.
IQiyi creates its own TV dramas and reality shows and licenses films for its video platform, which is available as a smartphone or TV app, or on its website.
For 2023, iQiyi said on Wednesday that its original content accounts for a record 65% of the major dramas it has released.
The company claims it now has more than 50 in-house studios producing more than 200 shows a year.
The growth in in-house production reflects a greater change in China's film industry over the past five years, Wang said, noting that previously the majority of content was made by third parties, leading to bidding wars for shows that drove up costs.
Other major Chinese video platforms with longer content include Tencent video, Ali BabaOwned by Youku and Bilibili.
The second aspect of iQiyi's strategy is to use a centralized platform to analyze consumer preferences, Wang said.
The data, which the company now has enough for five years, allows us to determine what type of viewers are watching the series during the summer vacation, for example, and which participation of the director or producer contributed most to the success.
Wang said recent data shows that more people across China are watching iQiyi content on internet-connected TVs and, increasingly, screens inside electric cars.
Finally, he said the company is making a targeted effort to ensure a return on production projects, rather than just throwing money into one big project with a famous director or crew.
Declining numbers of subscribers
Despite iQiyi's record revenue, net income and cash flows in 2023, the company's average daily number of total subscribers fell to 100.3 million in the fourth quarter, compared to 111.6 million for the same period last year and 107.5 million in the third quarter.
Average monthly 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 that the company is reaching a few hundred million people per month because each subscription can represent a household. But he acknowledged there was pressure to produce better content in order to bring subscriber numbers back to levels seen during a hit TV drama series in early 2023.
IQiyi, whose parent is a Chinese technology company Baiduas it has long been eyeing the market outside China, has a presence in Southeast Asia.
Wang said overseas expansion will remain the focus next year, but declined to reveal details.
“We've looked at the precedent of Netflix's success, we've seen Disney's global success, and we know that at some point, high-quality content is going to be appreciated,” he said, noting that sentiment motivates the team overall.
