Entertainment and streaming company iQiyi generated RMB 7.6 billion (USD 1.2 billion) in total revenue for Q2 2021, up just 3% year-on-year but beating market expectations of RMB 7.4 billion (USD 1.14 billion), the company announced in its earnings results on Thursday.
The number of subscribers on iQiyi reached 106.2 million in the June quarter, slightly more than its 105.3 million in Q1 2021. The company’s revenue generated from membership services remained flat at RMB 4 billion (USD 617.3 million), roughly matching the same period last year. iQiyi recorded a 15% YoY increase in revenue from online advertising services in Q2 2021, as China’s macroeconomic recovery boosted brands’ marketing budgets.
The Baidu-owned company is continuing to develop its iQiyi Lite app, a personalized entertainment portal targeting users in China’s lower-tier cities, which reached 1 million daily active users during Q2 2021. With only around a 7% overlap with members of iQiyi’s main app, the new app’s target demographic is users between 25 and 39 years old. It is developed to run on lower-quality smartphones, Liu told investors on the earnings call.
In terms of content strategy, iQiyi acknowledged that it needs to enhance its content library’s appeal to younger users and teenagers. The company captured key exclusive broadcast rights to soccer intellectual property. like the 2022 World Cup Qualifiers and the next four years of the English Premier League. Although Chinese users still have a relatively low willingness to pay for IP, iQiyi is betting on consumption upgrades driving the long-term monetization potential of its user base, Liu said on the conference call.
On the increasing regulatory pressure in China’s tech sector, iQiyi’s head of capital markets Fan Liu explained that the streaming industry would not be impacted by antitrust campaigns, as the sector has intense competition for IP. In light of the crackdown on after-school tutoring in China, Liu hoped that students would have more free time for entertainment as a result. The company’s share price fell 7.25% to USD 9.47 in Thursday trading following the earnings announcement.