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"A Little Thing Called First Love", "Ghost Blows Out the Light", "Country Love", "Hello, Old Times"… Which drama did you subscribe to?
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Report | Investment community
On March 17, iQiyi submitted a restatement of its prospectus No. 1 to the U.S. Securities and Exchange Commission. The document showed that as of the end of February 2018, the number of iQiyi's paid members reached 60.1 million, an increase of 9.3 million from 50.8 million in 2017.
The prospectus has just been updated, and Tencent can't sit still. Yesterday, Tencent Video announced the paid membership data as of February 28, with a total of 62.59 million. It is slightly larger than iQiyi's 60.1 million paid membership. Tencent Video also announced like top up , and in the fourth quarter of 2017, its average daily active users on mobile terminals reached 137 million, continuing to rank first in the industry.
This is Tencent's further consolidation of its leading position in the industry after it announced in September last year that it had exceeded 43 million users and became the industry leader.
This is not just a competition between Tencent Video and iQiyi. If we add the data of Youku Tudou, Mango TV, PPTV and other platforms to the huge traffic entrance of the video platform, the number of paying users may be close to 200 million.
Youku, iQiyi and Tencent Video are competing with each other and burning money like crazy with the support of BAT. In this prosperity, is it an industry explosion or a bubble illusion? With the surging number of users, when will the video platforms make a profit?
Market penetration is not yet saturated, and the growth rate is still
This market growth is still growing.
It is understood that the 62.59 million member statistics are the number of users who are still paying as of February 28, including all users in the payment cycle. There is no doubt that this is the highest number of paid members that domestic video websites have announced so far. With Youku, iQiyi and Tencent Video playing cards, how much market capacity is left to be developed?
Almost all paid video platforms use the world’s largest streaming media site as a benchmark. According to the data released by Tencent and iQiyi, the number of users has even exceeded that of their local users.
The fourth quarter 2017 financial report shows that as of December 31, 2017, the company added 8.34 million streaming users in the fourth quarter (including 1.98 million domestic users in the United States, reaching 54.75 million; and 6.36 million global users, reaching 62.83 million), and the total number of paying users has exceeded 100 million.
Tencent Video, which has the largest number of paying users in China, has 62.59 million users, which is less than 1/12 of the 800 million netizens. In this regard, Sun Zhonghuai, vice president of Tencent and CEO of Penguin Pictures, said, "There is still some gap in consumption levels between the two countries. The penetration rate of local members in the total population is still lower than that of the United States. Therefore, although our current number of members has reached a relatively high level, there is still a lot of room for improvement."
When comparing with the United States, another important factor must be considered: the charging standard and the rate of increase. In the past two years, the membership fee has been continuously raised. In October last year, the price increased by 10% again, and the monthly fee for each user increased by 1 to 2 US dollars. The cheapest package is 7.99 US dollars/month (about 50 yuan). After the price increase, the direct income from APP membership fees in 2017 was 510 million US dollars, far exceeding the 215 million US dollars in 2016.
The US keeps raising prices, while China is offering frequent promotions. The monthly subscription fee for Youku, LeTV, iQiyi, and Tencent is 15 yuan, and the price will be lower for quarterly membership, annual membership, and some seasonal discount packages.
Judging from the average customer price and overall revenue scale, domestic video websites still have a long way to go. Obviously, the payment habits of domestic audiences need to be further cultivated.
Content is king
After the release of iQiyi and Tencent Video’s data, everyone is waiting for the release of Youku Tudou’s data. However, since Youku announced in December 2016 that its paid membership exceeded 30 million, it has not updated its paid membership number. But it still does not prevent the industry from considering it, iQiyi and Tencent Video as the first echelon of the domestic video industry.
Today, the number of paying users of iQiyi and Tencent Video has increased dramatically, and the industry is on the verge of an explosive period. After quickly reaping the user dividend, the momentum is no longer as fierce as in the early days. How to maintain the growth rate and win in the platform war is a problem that all platforms must face.
For video websites, whether they can attract users to pay is often determined by the stimulation and inducement of a certain film or TV series or online variety show, while whether they will renew their subscriptions depends on whether the platform can continuously and stably produce high-quality content.
The saying that content is king is never outdated. Sun Zhonghuai also confirmed this in an interview with the media: "The number of paid members suddenly exploded about two years ago. One very important node was the popularization of mobile payment, which is a very important infrastructure. In fact, paying to watch content is not a new model. In the final analysis, it still requires high-quality content and continuous scheduling."
Tencent said that the rapid growth in the number of paid members is due to Tencent Video's continuous investment and innovation in content, products, and marketing. Content such as "Nothing Gold Candle in the Sky", "Ghost Blows Out the Light" series, "Country Love", "The Eternal Love", "A Love So Beautiful", and especially the performance of self-produced dramas, have further strengthened member stickiness and attracted a growing number of new paid members. In addition, the self-produced online variety show "The Next Generation of Idols" has expanded the fan economy, and animations such as "The King's Avatar", "Battle Through the Heavens", and "Douluo Dalu" and documentaries such as "Blue Planet 2" have also become new growth points for membership business.
When will it be profitable?
Amid the prosperity, there is an embarrassing fact lying before us: when will we make a profit?
At first glance, the top video websites are thriving and competing with each other, but the apparent prosperity cannot hide the chronic problems. Although the situation of Youku, iQiyi and Tencent Video has been formed for a long time, the competition for top content resources has become increasingly fierce. When will they achieve profitability is a headache.
At the end of 2017, each company released their 2018 film list, which was quite spectacular. They released their own dramas, online variety shows, online movies, and they also tried their best to compete for the exclusive broadcasting rights of top content. The tug-of-war over content has resulted in several consecutive years of losses.
According to statistics, iQiyi lost 2.383 billion yuan in 2015, 2.765 billion yuan in the same period of 2016, and is expected to lose 3 billion yuan in 2018, showing a trend of gradual increase. Youku Tudou and Tencent Video have each made preparations for a loss of 8 billion yuan in 2018. It has to be said that in the echelon of BAT, bigo diamond top up , no one is willing to lag behind in the money-burning war.
For video websites, membership income and advertising income are the two biggest support points. However, there is a conflict between user payment and interstitial advertising. Now that the bonus period of paying users has arrived, it is undoubtedly a good thing for the platform to get rid of the film industry model that is overly dependent on interstitial advertising. Of course, it also gave rise to more and more diversified advertising placements.
According to the 2017 China Online Audiovisual Development Research Report, the proportion of paying online video users in China continued to grow in 2017, with 42.9% of users having paid for videos, and the awareness of paying has been formed; even among the non-paying group, 25.5% of users said "if there is something they particularly want to watch, they don't mind paying", and another 5.2% of users said they would pay within the next year. Some analysts also said that by 2020, the number of paid video members in China will exceed 200 million, and the corresponding market size will reach nearly 50 billion yuan.
Let's talk about the model again. After raising the membership fee in October 2017, it increased the budget to 8 billion in 2018. Examples of burning money are not uncommon for video websites, but the model of making money while burning money seems to be able to provide a reference for domestic video websites.
According to foreign media reports, there was no resistance from users after the price increase. It is reported that on October 5, the day the price increase was announced, the stock price rose sharply, instantly breaking through the 200 yuan per share mark, and also brought a new high in revenue for the year.
Of course, the premise is that there is always high-quality content to attract users.
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