Online video has always been a much desired and hotly battled sector in China’s competitive internet market, with the local internet trio—Baidu (Nasdaq: BIDU), Alibaba (NYSE: BABA), and Tencent (HKSE: 00700), the three largest players—all dipping their toes into the sector.
Interestingly, while Baidu appears to be the puniest out of the trio, its streaming business, dubbed iQiyi, and often hailed as the Chinese equivalent to Netflix, fares a lot better in metrics like market share and paid subscribers, when compared to Alibaba’s Youku, or Tencent Video.
iQiyi and Netflix share many commonalities on the surface. Both are listed companies in the streaming sector. Both are known for their in-house developed original shows. Lastly, both are, these days, benefiting from the COVID-19 pandemic that left hundreds of millions of people homebound to seek consolation in online videos during their isolation.
The biggest difference between the two companies is that Netflix is a hundred percent paid service—meaning that for non-subscribers there is nothing to stream—while iQiyi maintains a freemium service for non-subscribers, where there is still free but ad-supported content to watch. Their revenue sources are also different from each other, with Netflix counts on mostly subscriber revenue, and iQiyi has more diversified revenue sources.
On a separate note, iQiyi has also been toying with the short-video format, which is gaining much traction among the younger generation and led by ByteDance’s short-video app Douyin.
However, even with the largest market share and the highest number of paying subscribers in the humungous Chinese market, iQiyi is yet to earn a profit, owing in large part to the notoriously hefty cost of the streaming business sector, which overweighs every dime iQiyi pulled in through its membership service, online advertising, and content distribution.