Under the influence of the epidemic, the film industry suffered a cold winter, and the market for "Lunar New year" and "Summer" originally staged every year. In the first quarter of this year, the total box office of the national film market decreased by 87.94% year-on-year to only 2.246 billion yuan, and the number of moviegoers decreased by 87.51% to only 60.0575 million people. The major cinema lines that have just reopened are also restricted, and the business situation is still grim.

The epidemic has had an impact on the upstream and downstream of the industry, but with the help of the isolation policy, online has become the only active market in the industry. During the Spring Festival, Xu Zheng's "embarrassing mother" chose to release it online. In the first half of the year, three major video platforms all increased the number of online movies, including iQIYI, Inc. 176, Tencent 86 and Youku 114. in terms of market share, iQIYI, Inc. ranked first in terms of market share, while Youku ranked first in terms of market share, while Youku ranked first with 28.7%. Tencent is 21.7%.

The network platform directly broadens the distribution channels of the film, so that the film side can basically recover the cost through the Internet and alleviate the operating pressure under the epidemic; on the other hand, the video platform also obtains high-quality content to better meet the needs of users to watch movies.

First, the benefits were obvious during the epidemic, with iQIYI, Inc. Q1 growing strongly.

Taking advantage of this, with a strong supply of TV series, movies, and variety content, iQIYI, Inc. achieved strong growth in the total number of user hours and the number of subscription members in the first quarter of this year, with a net increase of 12 million in the single quarter, reaching a total of 119 million, an increase of 23% over the same period last year. The company's total revenue also reached 7.6 billion yuan, an increase of 9% over the same period last year.

Membership service is the company's first source of income, with revenue of 4.6 billion yuan in the first quarter, a year-on-year growth rate of 35%, and total revenue accounts for more than 60%. However, due to the epidemic, the company's advertising business also declined seriously, with online advertising revenue of 1.5 billion yuan, down 27% from the same period last year, a new low in nearly two years. In addition, content distribution revenue of 603 million yuan increased 29% compared with the same period last year, while other revenue was 876 million yuan, down 9% from the same period last year.

Although it was a blessing in disguise in the first quarter, the management was still cautious in the face of subsequent business development. As for the membership growth in the second quarter, CEO Gong Lei believes that with the resumption of work and production, the viewing time of users has decreased, and in April, the platform has also observed a certain decline in the number of users, but the range is very weak, the management explained, because the time spent watching videos during the epidemic is too long, resulting in a natural decline. As can be seen from QuestMobile data, the number of active users declined in April and May after experiencing rapid growth from January to March, and iQIYI, Inc. performed slightly better than the other two.

For the advertising business, due to the challenges brought by the macro environment, brand advertising revenue has been significantly affected, the budget of advertisers has been reduced, and the delay of variety shows has also had a negative impact on advertising revenue.

Therefore, in the coming year, iQIYI, Inc. still faces severe challenges, and the company's content cost, net profit loss and cash flow situation are still issues that investors need to pay attention to.

Second, the penetration rate of online cinema is increased, and users' willingness to pay is enhanced.

At the same time, after the isolation during the epidemic, users' acceptance of the network platform has further increased, and their willingness to pay has gradually increased. These long-term benefits are expected to further enhance iQIYI, Inc. 's revenue space. According to "Film Market data Insight in the first half of 2020", 73% of viewers have spent on online cinema, and 64% of viewers have chosen "fully acceptable" and "more acceptable".

The establishment of online payment model will help the film side, platform and users to benefit and form a healthy business cycle. Film side, cinema, video platform and users are interdependent, online and offline in the future is expected to coordinate development, integration and symbiosis.

With the recent release of "China's New rap", "Youth with you" and "Summer of the Band", the relevant hot searches have begun to spread on the Internet. According to the performance and user Analysis of Variety Webcast in the first half of 2020, from January to June, iQIYI, Inc. ranked first in terms of new and effective broadcasting in variety, leading the industry. In July, the company successfully held the summer pleasure party, releasing nearly 60 high-quality content projects at one time, including 20 home-made variety shows and 40 high-quality dramas. The platform continues to expand the content reserve of the platform, at the same time, it further attracts new users.

Conclusion

In the second quarter, the company also spread the news that Tencent was going to be in charge. Although Baidu, Inc. clarified later, various platforms suffered from the plight of spending a lot of money on long videos for many years. With the end of the sinking of the Internet and the fading of the demographic dividend, the ultimate core competitiveness of the long video field is still the production capacity of content. Grasping what users see and what the platform provides will be the key to the next competition in long video.

The company is expected to release its latest results after trading on Aug. 13, and Bloomberg expects revenue to reach 7.35 billion yuan, but still at a loss.