IQiyi (IQ) - Facts (changing my view)

Investment Analysis Clubs Saul’s Investing Discussions
1

Following my recent exchange with DreamerDad, I have reevaluated IQ.

After crunching some numbers; looking at the industry stats and reevaluating the quality of IQ’s management; I have changed my mind and am initiating a position in this business.

Facts are presented below:

  1. China has around 580 million online video viewers (approximately 75% of total internet users)
  2. Both Tencent Video and IQ have around 45% penetration; Alibaba’s Youku has roughly 29%
    penetration
  3. IQ has around 120 million Daily Active Users and close to 422 million Monthly Active Users
  4. IQ’s paid subscribers are now approximately 60 million
  5. In 2017, China’s total online video revenue was US$15 billion
    (Ads represented 48.6% of total revenue, paid users = 24.8%, copyright distribution = 23.1%)
  6. Between 2017 and 2020, China’s online video ad spending is expected to increase by 80%
  7. Between 2017 and 2020, China’s revenue from paid users is expected to triple; due to doubling of
    paid users and increase in monthly ARPU from $2.76 to $4.315
  8. IQ’s total revenue in 2017 was $2.67 billion (split between advertising, paid subscribers,
    copyright distribution)
  9. If we apply the industry wide growth projections set out in (6) and (7) above; in 2020, IQ’s
    paid subscription revenue should be $2.8 billion; advertising revenue should be around $2.8
    billion and after taking into account the copyright distribution/other revenue, TOTAL revenue
    should be around $6 billion
  10. The above projection will imply 3-yr revenue CAGR of 30% between 2017 and 2020
  11. Currently, IQ is trading at 7.66 TTM sales
  12. If IQ generates $6 billion in 2020 and trades at 6 times sales; its market cap will grow to $36
    billion (versus $22.6 billion today); representing a shareholder CAGR of 26% until 2020
  13. China’s internet giant Baidu is still the majority shareholder
  14. In 2010, IQ’s CEO (Mr. Yu Gong) founded IQ and he still owns roughly 10% of the company (skin
    in the game). Previously he founded Focus.cn (China’s leading online real estate services
    company) which was acquired by Sohu in 2003
  15. The CEO of Ctrip (Ms. Jane Sun) has recently joined IQ’s Board as Independent Director
  16. Baidu’s Senior VP and General Manager - A.I. has also been appointed as Director of IQ’s Board
  17. IQ has recently received China’s first Digital Rights Management (DRM) certification
  18. IQ’s content is very popular - the company featured 42 of the top 50 most watched drama series
  19. IQ has recently been granted streaming rights for all four of the PGA Major golf tournaments
  20. IQ’s CEO has recently stated that he wants IQ to become the Disney of China
  21. The company also wants to expand in international markets (whether it succeeds is anybody’s guess)

The above company specific numbers, the quality of IQ’s management team; China’s industry wide trends and current valuation have caused me to change my mind and I’m now investing in this business.

It goes without saying, IQ is not without risk, the above is simply my opinion (not investment advice or recommendation to invest) and every reader on this discussion board should do his/her own homework to ascertain whether IQ is appropriate for their personal investment objectives and risk tolerance.

For my part, I am allocating 3% of my portfolio to this business.

40 Likes
2

Great summary, GM!

I had been trying to keep news items and links on IQ in one post but got behind. Here is where i left off…maybe some of these are new to you and useful:

IQ in the news. Again. They have been consistently churning out PR to continue growing their brand.

Here is TMF saying “check this out!”: https://www.fool.com/investing/2018/06/14/why-iqiyi-stock-ga……

Here they announce board changes, which include the CEO of CTrip and the head of Baidu’s AI division:
https://globenewswire.com/news-release/2018/06/14/1524475/0/……

Finally, here we have iQiyi leading an AI contest utilizing 200-1000 teams across China universities and research institutes:
https://www.prnewswire.com/news-releases/iqiyi-launches-ai-c……
“In this unprecedented initiative, iQIYI will provide participants of the competition with the world’s largest data set of celebrity video materials (iQIYI-VID) containing over 500,000 video segments of 5,000 celebrities from the world of entertainment, totaling over 1,000 hours.”

iQIYI’s “Hot-Blood Dance Crew” Smashes Industry Records for Total Advertising Revenue https://seekingalpha.com/pr/17190493?source=ansh $IQ

The show has been one of this year’s most followed and discussed Chinese programs, attracting more than 1.8 billion views as the final episode was shown on iQIYI’s platform last weekend, with topics relating to the show on Chinese microblogging site Sina Weibo receiving over 20 billion views.

–

IQ integrating financial services into their platform. More recent news further below:

iQIYI Launches “Change Plus” Online Wallet to Integrate Entertainment and Financial Services https://seekingalpha.com/pr/17187634?source=ansh $IQ

iQIYI’s “Change Plus” online wallet allows users to enjoy new membership benefits. Users who deposit a certain amount of money on iQIYI can enjoy all of iQIYI’s VIP membership services and can deposit or withdraw their money at any time they want. They will be able to enjoy the benefits of VIP membership for as long as they keep money saved on “Change Plus”.

Liu Wenfeng, chief technology officer of iQIYI, said: “iQIYI’s analysis of big data provides accurate insights into the behavior and preferences of consumers, helping integrate finance services with our entertainment platform and expand our user base to include high-net-worth members.”

Also saw this Roku article, which name-dropped IQ side by side with Netflix. I think this is notable as the more mainstream attention hits IQ, the more it can ride that momentum and be given a “netflix-like” valuation.

https://finance.yahoo.com/news/roku-inc-gearing-massive-brea……
Valuing Roku Stock
So what’s up with Roku the company? Given how hot streaming names like Netflix, Inc. (NASDAQ:NFLX) and iQiYi, Inc (NASDAQ:IQ) have been — the latter of which is being dubbed the Netflix of China — it’s no surprise to see Roku stock heating up.

iQIYI Pictures’ “Blue Amber” Shortlisted for Awards at the 2018 Shanghai International Film Festival

iQIYI today announced that its in-house produced film “Blue Amber” has been shortlisted for two ‘Asian New Talent’ awards at the prestigious Shanghai International Film Festival (SIFF), in the categories of ‘Best Film’ and ‘Best Cinematography’.

The motion picture was produced by iQIYI’s film division, iQIYI Pictures, as part of the company’s program to produce and distribute films by first-time directors. The success is a recognition of iQIYI’s innovative model which seeks to combine the strength of its internet platform with film content of unmatched quality.

“Blue Amber” tells a story of a widow who takes financial revenge on the family involved in the killing of her husband. It was adapted from the novella “Two Hundred and Forty Months of Life” by esteemed Chinese author Xu Yigua and was written and directed by Zhou Jie, a rising young star in the world of Chinese cinema. “Blue Amber” is Zhou Jie’s debut film and was developed through iQIYI’s ‘Plan 17’ , an initiative designed to cultivate new and exciting directors in China. The film script was awarded “Best Film Investment Project” in the “Young Directors” category at the 2016 Shanghai International Film Festival.

http://pdf.reuters.com/htmlnews/htmlnews.asp?i=43059c3bf0e37……

–

https://finance.yahoo.com/news/iqiyis-newly-launched-smart-t……

announced the launch of “QIYI Guo Kids Edition”, a video streaming app for smart TVs designed for children up to the age of 12. Developed in collaboration with Galaxy Internet TV, the app utilizes artificial intelligence to provide tailored recommendations for its young users, while giving parents the ability to closely monitor and adjust content and time control settings. QIYI Guo also provides paid premium children’s content to meet the strong demand for safe and educational kid-friendly programs.

“With the launch of QIYI Guo Kids Edition, iQIYI has become the first video platform to provide premium paid content for children in China. This represents an important step forward for us as we explore opportunities in the paid-for children’s content market,” said Duan Youqiao, senior vice president of iQIYI.

As an important step to optimize the user experience, iQIYI takes into account differences in the viewing preferences of children. As such, QIYI Guo Kids Edition is free of advertisements and provides spoken instructions to ensure ease of use.

info from older 6/1 post:

IQ wants to be disney…not just next netflix.

Check out 3 recent announcements. My sense is their mgmt will do a good job putting PR pieces in the news to keep momentum going in between ERs.

iQIYI’s “Hot-Blood Dance Crew” Becomes First Chinese Online Premium Variety Show Distributed in the Americas https://seekingalpha.com/pr/17179803?source=ansh $IQ

iQiyi has licensed a show here in the west.

And they have that show licensed on the same OTT hong kong station that TTD ceo jeff green specifically called out on last ER conf call.

iQIYI also announced that the streaming rights to “Hot-Blood Dance Crew” in Hong Kong have been purchased by TVB’s new media OTT platform

iQIYI Literature Signs Top Online Novelists to Lead Development of Original Content https://seekingalpha.com/pr/17175119?source=ansh $IQ

iQIYI Literature has signed exclusive agreements with four of China’s top online novelists – Tang Shao, Nan Pai San Shu, Fresh Guoguo, and Shui Qian Cheng – to become iQIYI Literature “Chief Structure Officers”, leading a team of star writers to guide the development of iQIYI Literature.

iQIYI Opens First Offline On-Demand Movie Theater https://seekingalpha.com/pr/17168670?source=ansh $IQ

iQIYI will work to bring Yuke movie theaters to first- and second-tier cities throughout China, providing more consumers with a high-quality, on-demand entertainment experience.

Yuke movie theaters combine the convenience of on-demand service with the high quality audio-visual environment of traditional cinemas. Users are free to select the time and location of viewing, as well as content from iQIYI’s online movie library

7 Likes
3

Thanks; will review later today.

Best,

GM

4

IQ story is very attractive… like NFLX… it will also be questionable on how / when will they really make profit, so it could be wild ride.

So balance sheet becomes important. Specially given chinese company and its complex holding structure. (Yes they are growing revenue but if they are burning cash, they need strong balance sheet to continue to grow).
Looking at last Q earnings release, I am spooked about its equity structure.

I havent seen a company with shareholders’ deficit - rather than equity.

See the release on this link.

https://seekingalpha.com/pr/17143578-iqiyi-announces-first-q…

They are showing shareholders’ deficit RMB (14,360,603) which translates ~$2B+ deficit. Although they show RMB22B (US$5B+) in mezzanine equity… and to counter that they have RMB1.3B in fixed assets (very hard to evaluate) and RMB3.7B in intangibles and goodwill (very hard to ascertain).

And, its not clear to me if this is after they collected proceeds of US IPO - although it seems like it.

So again, I dont know how to account for mezzanine equity and shareholders’ deficit. If it is like regular equity, then the picture looks fine. But if it is some sort of debt / callable amount, the company can have real issue.
As a tertiary shareholder (lets face it, its founders and then mainland holders first… ADRs rights are most likely diluted), i dont why i would not be diluted very soon.

BTW - they operate at 0% gross margin… (Revenue RMB 4.87B, cost of revenue RMB 4.84B)… so they essentially need other people’s money to keep funding operating expenses to sustain.

I did have Netflix shares very early on and foolishly (small f), i did sell after making 4x… but i dont regret it… part of the reason i sold NFLX early was the same, i could not see them growing positive cash flow…
AMZN is different story, they could make cash any day they decided, they just keep investing in newer business, like SHOP and SQ… thats really great.

Again, i very much like IQ story of world domination… I am really spooked with nuts and bolts of numbers… am I missing something badly here?

4 Likes
5

AMZN is different story, they could make cash any day they decided, they just keep investing in newer business

–

I think some business models don’t fit traditional frameworks and give some investors pause.

Netflix could turn a profit anytime they wanted, just like AMZN, but curtailing the reinvestment.

I am stealing the following from NPI and probably not doing it justice, but I found it interesting:
If a company buys land, they get to say they have X amount of assets and appear to “have” something for their dollars spent.
If a company invests in AI/tech to enhance/improve their solutions, it is an expense but on the books they have nothing to show for it.

Netflix is building a lead, or moat, or however you want to define it, via content to earn subscriber loyalty. The AI invested in helping to determine the type of content most likely to retain/grow the sub base is invaluable, but doesn’t even have the same value with traditional accounting as buying swamp land would.

IQ is investing to build their moat(s) as much as they can. By the way, another favorite of mine is TTD, and while profitable the CEO has repeatedly stated on conf calls that it is “land grab time” and he won’t apologize for investing in the business, as we just saw with their Next Wave release, which was a significant investment of both time and resources…but the resulting products have no monetary value, and the property or office buildings they may own probably have more “worth” on paper. Yet these solutions are key to taking them to the next level up as a company and driving more revenue, etc…

Just rambling here, as I am too distracted with morning work, but just throwing out that I think investment in what can be considered R&D or product development is too often considered a negative when it is the path to the future for many of these companies and they would be doing a discredit to themselves and shareholders if they just halted that spending to eke out an otherwise meaningless EPS in the short-term.

Dreamer

4 Likes
6

Netflix could turn a profit anytime they wanted, just like AMZN, but curtailing the reinvestment.
—————————-

I disagree. Netflix is in the race for original content that pries our eyes and time. HBO, Amazon, and others bid for those exact same projects and the exact same directors and the exact same actors.

The concern of rising content prices is a legitment concern as it is the feed stock to these companies.

That said, the story of NFLX and IQ and others is about growing users, and to do that, it requires producing the best content. NFLX has proven this and IQ owns 42 of the top 50 shows in China.

That’s the selling point. Once users are subscribed, they want entertained, and with the data collection NFLX and others know what they like more than traditional outfits

Strongly suspect that will change over the next decade. But we have a long runway to get there.

7

Now I wish I could buy more. But alas, no more than I can completely lose.

Question. Is there anything that would make you think this company or a competitor would attempt to move into India? The demographics of India are much better than China.

Cheers
Qazulight

Great summary, GM!

I had been trying to keep news items and links on IQ in one post but got behind. Here is where i left off…maybe some of these are new to you and useful:

IQ in the news. Again. They have been consistently churning out PR to continue growing their brand.

Here is TMF saying “check this out!”: https://www.fool.com/investing/2018/06/14/why-iqiyi-stock-ga……

Here they announce board changes, which include the CEO of CTrip and the head of Baidu’s AI division:
https://globenewswire.com/news-release/2018/06/14/1524475/0/……

Finally, here we have iQiyi leading an AI contest utilizing 200-1000 teams across China universities and research institutes:
https://www.prnewswire.com/news-releases/iqiyi-launches-ai-c……
“In this unprecedented initiative, iQIYI will provide participants of the competition with the world’s largest data set of celebrity video materials (iQIYI-VID) containing over 500,000 video segments of 5,000 celebrities from the world of entertainment, totaling over 1,000 hours.”

—

iQIYI’s “Hot-Blood Dance Crew” Smashes Industry Records for Total Advertising Revenue https://seekingalpha.com/pr/17190493?source=ansh $IQ

The show has been one of this year’s most followed and discussed Chinese programs, attracting more than 1.8 billion views as the final episode was shown on iQIYI’s platform last weekend, with topics relating to the show on Chinese microblogging site Sina Weibo receiving over 20 billion views.

–

IQ integrating financial services into their platform. More recent news further below:

iQIYI Launches “Change Plus” Online Wallet to Integrate Entertainment and Financial Services https://seekingalpha.com/pr/17187634?source=ansh $IQ

iQIYI’s “Change Plus” online wallet allows users to enjoy new membership benefits. Users who deposit a certain amount of money on iQIYI can enjoy all of iQIYI’s VIP membership services and can deposit or withdraw their money at any time they want. They will be able to enjoy the benefits of VIP membership for as long as they keep money saved on “Change Plus”.

Liu Wenfeng, chief technology officer of iQIYI, said: “iQIYI’s analysis of big data provides accurate insights into the behavior and preferences of consumers, helping integrate finance services with our entertainment platform and expand our user base to include high-net-worth members.”

—

Also saw this Roku article, which name-dropped IQ side by side with Netflix. I think this is notable as the more mainstream attention hits IQ, the more it can ride that momentum and be given a “netflix-like” valuation.

https://finance.yahoo.com/news/roku-inc-gearing-massive-brea……
Valuing Roku Stock
So what’s up with Roku the company? Given how hot streaming names like Netflix, Inc. (NASDAQ:NFLX) and iQiYi, Inc (NASDAQ:IQ) have been — the latter of which is being dubbed the Netflix of China — it’s no surprise to see Roku stock heating up.

----

iQIYI Pictures’ “Blue Amber” Shortlisted for Awards at the 2018 Shanghai International Film Festival

iQIYI today announced that its in-house produced film “Blue Amber” has been shortlisted for two ‘Asian New Talent’ awards at the prestigious Shanghai International Film Festival (SIFF), in the categories of ‘Best Film’ and ‘Best Cinematography’.

The motion picture was produced by iQIYI’s film division, iQIYI Pictures, as part of the company’s program to produce and distribute films by first-time directors. The success is a recognition of iQIYI’s innovative model which seeks to combine the strength of its internet platform with film content of unmatched quality.

“Blue Amber” tells a story of a widow who takes financial revenge on the family involved in the killing of her husband. It was adapted from the novella “Two Hundred and Forty Months of Life” by esteemed Chinese author Xu Yigua and was written and directed by Zhou Jie, a rising young star in the world of Chinese cinema. “Blue Amber” is Zhou Jie’s debut film and was developed through iQIYI’s ‘Plan 17’ , an initiative designed to cultivate new and exciting directors in China. The film script was awarded “Best Film Investment Project” in the “Young Directors” category at the 2016 Shanghai International Film Festival.

http://pdf.reuters.com/htmlnews/htmlnews.asp?i=43059c3bf0e37……

–

https://finance.yahoo.com/news/iqiyis-newly-launched-smart-t……

announced the launch of “QIYI Guo Kids Edition”, a video streaming app for smart TVs designed for children up to the age of 12. Developed in collaboration with Galaxy Internet TV, the app utilizes artificial intelligence to provide tailored recommendations for its young users, while giving parents the ability to closely monitor and adjust content and time control settings. QIYI Guo also provides paid premium children’s content to meet the strong demand for safe and educational kid-friendly programs.

“With the launch of QIYI Guo Kids Edition, iQIYI has become the first video platform to provide premium paid content for children in China. This represents an important step forward for us as we explore opportunities in the paid-for children’s content market,” said Duan Youqiao, senior vice president of iQIYI.

As an important step to optimize the user experience, iQIYI takes into account differences in the viewing preferences of children. As such, QIYI Guo Kids Edition is free of advertisements and provides spoken instructions to ensure ease of use.

------

info from older 6/1 post:

IQ wants to be disney…not just next netflix.

Check out 3 recent announcements. My sense is their mgmt will do a good job putting PR pieces in the news to keep momentum going in between ERs.

iQIYI’s “Hot-Blood Dance Crew” Becomes First Chinese Online Premium Variety Show Distributed in the Americas https://seekingalpha.com/pr/17179803?source=ansh $IQ

iQiyi has licensed a show here in the west.

And they have that show licensed on the same OTT hong kong station that TTD ceo jeff green specifically called out on last ER conf call.

iQIYI also announced that the streaming rights to “Hot-Blood Dance Crew” in Hong Kong have been purchased by TVB’s new media OTT platform

------

iQIYI Literature Signs Top Online Novelists to Lead Development of Original Content https://seekingalpha.com/pr/17175119?source=ansh $IQ

iQIYI Literature has signed exclusive agreements with four of China’s top online novelists – Tang Shao, Nan Pai San Shu, Fresh Guoguo, and Shui Qian Cheng – to become iQIYI Literature “Chief Structure Officers”, leading a team of star writers to guide the development of iQIYI Literature.

----

iQIYI Opens First Offline On-Demand Movie Theater https://seekingalpha.com/pr/17168670?source=ansh $IQ

iQIYI will work to bring Yuke movie theaters to first- and second-tier cities throughout China, providing more consumers with a high-quality, on-demand entertainment experience.

Yuke movie theaters combine the convenience of on-demand service with the high quality audio-visual environment of traditional cinemas. Users are free to select the time and location of viewing, as well as content from iQIYI’s online movie library

8

I know next to nothing about India in terms of investing opportunities. At a high level, it seems I read that they are behind China at this point, but that many expect them to be the next big thing after China. This makes sense for no other reason than the mammoth populations both China and India have. Living in the tech world, it seems there are Indians (whether US-born or not) everywhere I turn, typically in the product development / software development sides of the house. So it is always a bit of a head-scratcher for me that India is not more advanced as a country than they seem to be, but I have a feeling it could ramp up rapidly with the right gameplan.

As for streaming in India:
https://www.bloomberg.com/news/articles/2018-06-28/can-netfl…
https://www.thehindu.com/entertainment/behind-the-rise-of-ne…

A quick search tells me Netflix wants to be big there, but currently Amazon is a competitive threat as are homegrown entities.

I don’t have the quick links here, but the mentions I have seen of iQiyi expanding have been more in other Asian countries besides India, and that may have been more around content licensing. The next ER should be telling, but I get the impression the focus is almost completely on China at the moment, which makes sense given the runway left to go after.

Dreamer

1 Like
9

A few insights from myself, I purchased a 2% position a couple days ago

  1. Badiu is the only and most widley search engine used search engine in China, basically no competition
  2. Guess what the top search results will be if you search for any type of show / movie(hint it starts with i and ends of i)

If you search iQiYi in baidu you will get some search rankings for video platforms, might be relevant but interesting, I added the eng. translation

1???(Youku) 303097
2???(iQiYi) 217474
3???(Tencent Video) 179776

Merc

10

If you search iQiYi in baidu you will get some search rankings for video platforms, might be relevant but interesting, I added the eng. translation

1???(Youku) 303097
2???(iQiYi) 217474
3???(Tencent Video) 179776

Can you provide some context on what “search rankings” might mean here? Is that total number of times someone searched for that name, or somehow is an actual ranking of the video service by users?

Also - just curious if you have any feedback on Youku, in terms of what content they are known for: is it more user-created videos like YouTube or short-form videos (which are trending up) or is it actual tv shows and movies?

In the US we might think of Hulu more for TV shows. YouTube has a TV offering now which is basically just streaming cable tv channels, but obviously their core offering is/was user-generated videos. And Amazon Video and Netflix offer a bit of both TV/series and movies, both licensed from others and created and funded internally.

I am guessing TenCent video is more that Amazon Video type, but I am not sure. Appreciate any insights, thanks!

Dreamer

11

You got my attention, so I did some looking as well…

            iQIYI, Inc        Netflix, Inc

Mkt cap     22.34B            169.02B

Employees   6,014             4,850

Found it interesting (assuming the Google Finance data is correct) that IQ has 1000 more employees. Not a typical view, but “market cap per employee” is definitely higher for NetFlix. Granted #1, Netflix is a much more mature entity… but do you think IQ will hire fewer employees over time to reach Netflix-level maturity? I certainly don’t. Granted #2, they’re probably cheaper employees dollar-wise in China, so there’s that.

NASDAQ: IQ   March 2018 Quarter
Revenue:             4.88B
Net Income:         -395.69M
Diluted EPS:        -13.79  (ouch?)
Net profit margin:  -8.11%
Cash on hand:        403.52M

That doesn’t seem like a lot of cash to be buying or creating content, so aren’t they almost completely reliant on near-term subscriber funds to pay for next week’s chunk of content? Not saying that smells directly like a Ponzi scheme, just wondering how long you can do that. And how do you ever get to positive EPS? Granted #3, I’m making a pretty big assertion based on surface-level glance…

Now, last week it was a $40 stock, and today it’s $32. That’s the typical sweet spot for a lot of my biggest sustained winners (buy in the 20s/30s), so I’m interested… But it was also a $20 stock as recently as May 18, so moving quickly…and can certainly move quickly both directions.

Keep the dialogue going, as we all learn from it, and I’m still looking…

12

Not a typical view, but “market cap per employee”

You can also do market cap per subscriber, and IQ becomes well under-valued compared to NFLX.
A couple different ways to slice that pizza.
Netflix about 8x the market cap but only 2x the subscribers. (plus NFLX doesn’t have secondary ad revenue stream like iQiyi does, however IQ has lower sub fees but much greater MAUs).

Not positive, but the March numbers you show may or may not contain the IPO proceeds. (raised $2.25b with IPO)

Finally…on starting closer to $20, they didn’t have the typical IPO pop that many saw this year, such as ZS, ZUO, Dropbox, etc… TMF threw out some reasons why perhaps: https://www.fool.com/investing/2018/04/02/3-reasons-iqiyi-fl…

Point is, if they had a more typical IPO runup, the price would have probably been closer to $30 that much faster more early on. But once the market saw their ER numbers, it really took off.

Dreamer

1 Like
13

The Baidu rankings says its the is popularity of search with those terms in the search.

zhaopin is china’s top job searching website, if you know chinese you can enter the company’s name and get an idea for what positions they are hiring and the scope and scale

http://zhaopin.iqiyi.com/job-index.html

You can see the main categories they list, try using google translate page to get an idea

They are listing a lot of positions including games and app development and content related business.

Also keep in mind that shows/movies are CHEAP to produce in china. I would stay away from those types of comparisons unless you plan on level setting the dollar amount as

Searching off Chinese Company review (like a glassdoor copy) websites iQiYi employment data https://www.jobui.com/company/11988468/

iQiyi salary overview (units ¥ (RMB), monthly salary)
¥19650 (5195 salary data)
Interval ratio
3K-4.5K 4.2%
6K-8K 4.9%
8K-10K 7.6%
10K-15K 14.7%
15K-20K 8.2%
20K-30K 30.6%
30K-50K 22.5%

The Average of 20k RMB is equal to about $3000 USD take home pay per month.

Based on the website they pay 31% average compared to peers.

Job listing categories % of listings:

Computer/Network/Technology Areas: 46%
Art / Design / Creative 16%
Style / Film / Writing / Media 12%
Market/PR/Media Accounted for 6%
Sales category Accounted for 6%

Not many people in china see much difference between youku vs iqiyi , currently the content across both are very similar. The exception is that youku still has more content (first mover) and is more similar to youtube because there are still clips and short videos along side with full fledge shows and movies, that includes news clips, celebrity clips, end user uploads, meme type of videos etc.

Merc

2 Likes
14

Dreamer… JAF… hlygrail…

Thank you for the dialogue…

As pointed out, building original content is really expensive… and yes, “if you build, they will come”… but if IQ pricing does not allow it to ever make money, and IQ will have to keep going to the well (investors - debt or equity), it becomes house of cards… the real concern is that Chinese market is so competitive, specially for “soft” products, that I worry if they will ever be able to raise prices to reasonable profit.

I have seen too many examples of this model… Indian telecom sector comes to my mind where they had to shell out huge amounts to buy to buy spectrum and invest a lot into networks to build out nation wide networks… only to offer $3 per month plans… guess what, none of them can ever become Verizon.

We have live example of trying to build recurring subscriber base at loss making model in the US today… check out rapid boom and bust of HMNY.

And on top of all of these, the equity structure of IQ is bizzare…

May be they will win one day, and I get that stock may still do well without the business doing as well… but at this price point and current balance sheet, I admit, I dont get this one.

Nilvest

BTW - i dont post much, but a long time fan and regular reader of this board.
Huge thanks to Saul, Bear, StepperWulf and many others… I do hold large position into some of the names mentioned here - SHOP, SQ, NTNX, PVTL etc… and done fairly well over last 18 months, not as much as many others here, but much better than my past records, thanks to this board.

4 Likes