With 100 Million Subscribers in China, iQiyi Wants to Take Its Show on the Road

The "Netflix of China" wants to reach out to a far greater international audience.

Danny Vena
Danny Vena
Jun 27, 2019 at 7:32PM
Technology and Telecom

iQiyi (NASDAQ:IQ), China's answer to Netflix (NASDAQ:NFLX), has achieved a notable milestone in its subscriber growth. The company's total subscriber base topped 100 million, adding more than three million in as many months, reinforcing its position as "China's leading online video streaming platform," founder and CEO Tim Yu Gong said in a written statement. The company says it's attracting more then just tech-savvy, suburban, and younger viewers, but it has focused on also providing viewing options for rural residents and the elderly, which has helped the company surpass this benchmark. 

To end the first quarter, iQiyi reported 96.8 million subscribers, up 58% year over year. More than 98% of them were paying members -- the remainder were on a free trial. This put the company firmly in the lead in China's streaming video space. Now, iQiyi believes that there are opportunities to be harvested abroad.

Three Asian children sit together, interacting with a tablet.

Image source: Getty Images.

Expanding into international markets

There are large pockets of Chinese citizens around the world, and iQiyi believes this target market represents a distinct opportunity. These expats, who are referred to as "overseas Chinese," number more than 60 million and can be found in more than 200 countries. Finding programming in their native language is likely to be difficult, even in this era of connectivity.

iQiyi's president of membership and overseas business, Yang Xianghua, revealed that the company is seeing increasing interest for Chinese-language shows and is planning to distribute more of its original programming in areas with the greatest demand, including North America, Singapore, South Korea, and Japan.

"Given more time, I think we can have a lot of opportunities in other markets globally," he said.

More than just a Netflix knockoff

iQiyi has resisted the comparison to Netflix, saying the label misrepresents the company. "Our business model is quite different from Netflix," Gong said in an interview. "The most accurate way to describe us [is] 'online Disney'."  

Unlike Netflix, which offers only streaming video subscriptions, iQiyi has an increasing number of verticals, including video games, literature, comics, and light novels, which are aimed at the young adult demographic and are typically illustrated with anime. The other more obvious distinction is the ad-supported tier from iQiyi that's free to users, which the company uses to attract new subscribers. 

It's this diversity of verticals that gives the company broad appeal in its home market, and that reality was borne out in iQiyi's recent results. The company generated 43% of its first-quarter revenue from memberships, while another 43% came from online advertising -- the result of ads shown to viewers in its ad-supported tier. The remainder was from program licensing and iQiyi's ancillary businesses -- including content merchandising and online games -- based on its original shows.


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Challenges remain

iQiyi execs are the first to admit, however, that taking its show on the road has limitations. While Netflix can simply replicate its domestic streaming model and export it globally, the situation is much different for a Chinese company.

"There are cultural differences and language differences, so it is difficult for us to expand overseas," Gong said.

Because of these hurdles, iQiyi is working to maintain its leading position in China and to deepen its ties with domestic customers, while also working to expand to foreign locales.