Baidu’s Netflix-Like Video Unit IQiyi Filed for U.S. IPO

IQiyi plans to raise USD 1.5 billion at a valuation of USD 10 Billion.

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  • IQiyi, Baidu’s answer to Netflix, filed for $1.5b IPO

  • IQiyi is a leading player, alongside Tencent Video, in Chinese on-demand video market

  • Baidu currently owns 70% of iQiyi and will remain the largest stakeholder post IPO


IQiyi, Baidu’s answer to Netflix, filed on Tuesday for an IPO on Nasdaq to raise USD 1.5 billion under the ticker IQ. Robin Li’s search engine giant Baidu expects to remain the largest shareholder of iQiyi after the float.

Founded in 2010 in Beijing, the company has posted losses since its inception. In 2017, it reported RMB 3.74 billion (approx. USD591 million) in net loss, up approximately 21.8% YOY. At the same time, its revenue rose to RMB 17.38 billion (approx. USD 2.75 billion) from RMB 11.24 billion (approx. USD 1.78 billion). The stark contrast between loss and revenue is mainly a result of the Chinese Netflix’s efforts in producing more and more high-quality and trend-setting original content.

Most part of its revenue comes from advertisements which brought the company RMB 8.1 billion (approx. USD 1.28 billion) last year, up 44 percent. However, the company is called the Chinese Netflix, mainly because the company is good at persuading users to pay for its content coupled with its track records of producing sensational blockbusters.

The company made RMB 6.5 billion (approx. USD 1.03 billion) from paying users, which accounts for 37.6 percent of the total revenue, up almost 74% compared with the same period in 2016.

Image from iQiyi’s prospectus.

IQiyi claims to have 50.8 million users subscribed to the platform paying on average RMB 130 (approx. USD 20.55), while there are respectively 43 million and 30 million users subscribed to its local rival Tencent Video and Alibaba’s Youku Tudou. Netflix, the company’s powerful American rival, had 50.8 million subscribers globally at the end of 2017 and is valued at USD127.4 billion.

High-quality content, especially original content such as self-produced TV drama and variety shows, is one of the main drives for its growth in user number. In 2015, the platform rolled out a 12-episode series DaoMu BiJi (盗墓笔记), or Grave Robbers’ Chronicles. The blockbuster series caused a temporary breakdown to its servers as too many people rushed to the website at the same time. According to its prospectus, the show generated more than 100 million video views within the first 24 hours of debut and over 4 billion views in total.

Image from iQiyi’s prospectus.

Last year, its phenomenal variety show Rap of China has generated 220 million views in a single episode and has made a dozen of young rappers new idols of many Chinese youngsters. The company has also struck a license agreement with Netflix in April 2017, allowing iQiyi to stream some of Netflix shows on its own website.

While drawing more and more people to its platform, high costs of original content also resulted in its growing losses.

GONG Yu, the CEO at iQiyi, told tech media Tech.QQ that the company is in no rush to make profits: “When to make profits is a strategic problem. IQiyi can indeed make a profit now, but that would come at the expense of shrinking market share.” Gong believes iQiyi is building a healthy and diversified revenue stream, including advertisement, subscription, derivatives, etc., and that will underpin the company’s growth in a cut-throat competition.

The competition among video streaming platforms in China has seen a shift from bandwidth & content to ecosystem & backer. Baidu, China’s #1 search engine, become iQiyi’s largest shareholder in 2012 and currently holds 70 percent of the company’s share. The floating of the yet-to-make-profit iQiyi would ease Baidu’s financial burden to let the latter focus more on AI which the company has heavily invested in.

Editor: Ben Jiang