AiQiYi – How To Be Profitable in the future

On Tuesday afternoon, AiQiYi Art in Beijing opened a “partner festival.” Hundreds of people sitting in the audience in addition to the media and guests, as well as AiQiYi Art platform for professional users, such as small and medium-sized film and television production agencies.

Originally by the purchase of copyright, their investment in film and television drama to attract users of AiQiYi Art, like Youku potatoes, YouTube, like to attract professional users to create content, give them advertising revenue.

The keywords that are repeatedly mentioned are “business model” and “cash”. AiQiYi Art has set up a 1 billion yuan venture capital fund, used to invest in content producers.

AiQiYi Art chief content officer Wang Xiaohui said that this year’s love of Fantastic Art from the IP ecosystem to explore a variety of service latitude, including the IP to maximize the value “, to the PGC more advertising into.

Today released content, is already love the recent adjustment of Fantastic Art from the most closely related to a film and television.

By the end of November, AiQiYi Art announced and New Oriental Online, EF Education and so on educational institutions “love classroom”, a paid education video program.

Almost the same time, Shenzhen, a mobile phone manufacturer’s official website began selling AiQiYi OEM phone, after purchase you can enjoy the love of Fantastic Art Gold VIP privileges. Although Fantastic Art also made a statement that never made mobile phones, but printed on the box, “AiQiYi Art co-products.”

More unexpectedly, a name called “love the odd headlines” of the application is also on the line recently, like today’s headlines do content aggregation.

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

Love odd headlines and today’s headlines

If you do not have the name of love and the main colors of green, you do not think it and the video site have anything to do.

According to senior vice president Geng Danhao, these are the links in the IP industry chain. AiQiYi headlines is “a powerful complement”, for the partners (of course, have their own AiQiYi Art) to bring information flow advertising revenue.

CEO Gong Yu recently accepted Tencent technology, said in an interview, “the next three or four years after the model matures,” advertising, membership and games and other content will account for one-third of revenue, together to fill the love of Fantastic Art wallet .

On-line more than six years. Burning a few billion, the Fantastic Art is still talking about “future” business model matures.

Baidu has no longer support no return of burned

Video site burning is not news. Youku listing from the operator in 2006, over the past decade, this has been a burn for the user’s business.

Video is Baidu, Alibaba, Tencent three companies throwing money games: Youku potatoes behind Alibaba, Tencent video Tencent. But Baidu, which provides money for Fantastic Art, has recently been less likely to spend more.

According to the third quarter of this year’s earnings, Baidu’s cost of content in the cost of 22.11 billion yuan, more than doubled over the same period last year. According to Baidu in the earnings report of the mark, this part of the cost of love from Fantastic Art, the purchase of copyright, organized by the program … …

Today, more than 12% of Baidu’s income to subsidize the money to AiQiYi Art. Accounting for three times the proportion of two years ago.

But the investment did not bring profits. Fantastic Art’s main income from advertising, although this figure has been up, but because the cost of copyright is too expensive, the loss of the entire site is also expanding, is now two years ago, three times.

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

On the other hand, Baidu own total revenue of 9% of the advertising business, also encountered problems.

Baidu’s main advertising revenue from medical. After the Wei Zexi incident, Baidu under social pressure and the government ordered rectification made adjustments. The second quarter of this year, Baidu profits have fallen 3 percent, the third quarter, total revenue has not increased. Can be expected that the bad situation will continue to continue.

In order to make some good-looking earnings, Baidu will attempt to love the odd art from the listed assets stripped out. This is good for both sides: AiQiYi Art can return to the financing and even listed, Baidu can throw away a huge loss of the source, so that the financial statements look good.

February this year, Robin Li and CEO of AiQiYi Art on behalf of the consortium launched on behalf of the Baidu offer to bid to 2.8 billion valuation of the acquisition of AiQiYi Art 80% of the shares. At that time, Baidu shares to Zhang up.

But New York hedge fund Acacia Partners, which holds $ 400m of Baidu shares, took the lead against the split, saying the price was too low, compared to $ 4.8bn when it sold to Alibaba.

A few months later, the privatization was terminated.

Can not tell, a serious decline in revenue, Baidu will not limit infinite blood transfusion to love. This also explains why the love of Fantastic Art recently looked a little anxious.

Looking back, love is already a Chinese video site, the commercial performance of a good one. It also tried almost all of the video-related business model.

With its development, we can see the entire Internet video industry in the profit struggle.

The beginning, the video site is about advertising, AiQiYi Art access to China’s largest Internet advertising platform

Buying high-quality copyrights, engaging viewers with content, selling more and more expensive ads, is a fundamental way to monetize video sites.

AiQiYi Art from the first day on the line, in the emphasis on “advertising technology.”

In 2010, Aiqi by Baidu set up on-line, the original president of the 12580 Gong Yu responsible for the flagship “genuine high-definition network video” video site, then called “Fantastic Art.”

Fantastic Art began to tell the story and Baidu on. Baidu advertising itself is the best thing, it is still the largest Chinese Internet advertising platform, search and marketing market Baidu occupy 90% market share, generating tens of billions of revenue each year. To this core business, Baidu first-tier cities in the country set up branch offices, three hundred forty-five line city hundreds of agents helped Baidu advertising.

From this perspective, the love of Fantastic Art occupied by the advantage of competitors do not have. Because Baidu, AiQiYi Art in the fourth year on the line (2014) on more than Sohu video, ranked third in the market share ranking.

“Advantage” is not only traffic, as well as data. Every day there are 60 billion search request is typed Baidu search box, 2013, Baidu search data to provide all love to do art analysis, released the “one search 100 Ying” precision advertising technology. This algorithm based on browsing records, search history, etc. constitute the “user portrait”, and then in the love of Fantastic Art show accurate advertising content.

For example, you have searched the last month, “car tax”, open the love of Fantastic Art will show you Land Rover, BMW, Volkswagen, Fiat’s patch ads.

2013 Fantastic Art and PPS merger, the data get through, AiQiYi Art said they “built China’s largest video advertising platform.”

There are several similar advertising technology products. For example, in 2013, the “Green Mirror”, Aiqi with large data as the “editor”, a comprehensive analysis of user video viewing data to determine user preferences, automatically the most concerned about the material extracted from the highest level of concern generated “Essentials” video.

This technology is more attractive to advertisers that know what the audience favorite part of the program, is the “precision delivery” of the first step.

Another example is the 2014 video in, post-production directly to the ads to add to the video. “Scrapwood Brothers 2” where there is a restaurant scene, the whole picture appeared twenty or thirty cans JDB, the actor sat down to pick up JDB pour into the cup, you can pour out the transparent liquid – Po is stitching up. “This is a bit like a three-dimensional world inside the PS” AiQiYi Art CTO so described. Gao Xiaosong’s “Xiaosong Qi Tan” also used this technology.

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

Video Jiabao Po is the late stitching up

“We are a technology company.” Gong Yu said in 2014, nearly half of the structure of AiQiYi Artisan engineers.

At the same time, competitors are trying something similar. Youku potatoes in 2015 and the lynx began to try to insert in some video to buy links.

These attempts directly led to revenue growth, according to Analysys International data, 2014 to now China’s online video market size doubled.

But this market is no longer growing. In the first quarter of this year, the market size of China’s online video operators was 6.69 billion yuan, down 6 percent from the previous quarter.

Advertising is not enough, because the copyright war does not stop

The cost of video sites mainly spent on the copyright procurement, which is even more obvious in the love of Fantastic Art. 2010 on-line time, AiQiYi Art to emphasize the provision of “genuine high-definition video content, the complete elimination of piracy.”

But the competition to keep the content to raise prices, copyright war from the beginning did not stop too.

In 2011, the average price of a TV set will be able to reach 70-80 million, up to 100 million. Youku year loss of 172 million yuan, potato losses of 511 million yuan, AiQiYi Art 500 million yuan loss.

Copyright war directly against a number of days not so abundant small sites, you may remember “Cool 6”, once also to copyright as the core competitiveness, announced in 2011 no longer do long video.

In 2012 the situation better, youku and potatoes combined to cool the copyright market for a while, popular copyright TV series such as “Zhen Huan biography” also set a single price of 300,000 yuan.

Sohu, Tencent and Oiqi tried to lower prices by forming an alliance to buy, the alliance has 12 TV rights, each company has contributed to the purchase of four network copyright drama, do the second distribution.

But the so-called “Union” was soon “exclusive content” of the competition broke up. 2013, Youku potatoes and Hong Kong TVB reached an exclusive copyright cooperation, Sohu positioning itself in the “genuine US drama,” AiQiYi Art to buy a full set of Austrian copyright animation … …

In 2014, the love of odd art to buy Hollywood more than 1000 film distribution rights. In the previous month, South Korea’s Busan Film Festival, the love of Fantastic Art also signed a 90 film contract.

Corresponding to the cost is higher than a year. 2013-2015, Baidu earnings reflected in the “content cost” each quarter to more than 90% of the rate of growth.

Up to now, the copyright price is still not down, but still more expensive.

A year ago, “Biography” by Tencent and music as the joint purchase, sold a single set of 300 million. Six months later, “Magic City” by the five video sites to buy, the price soared to a single set of 400 million. After another three months, “such as Biography” by Tencent and Youku joint purchase, set a single set of 9 million yuan record price.

“(Price war is) hate, make me sick, but still fight every day, spend a lot of money in the fight this thing.” Gong Yu in April this year, an industry forum, said.

Self-made content can save some of the copyright costs, but can not replace it

Copyrighted content to bring viewers and traffic, which directly corresponds to advertising revenue, which is probably why the video site “still fight” reasons.

Doing more controllable self-made content is the most sensible approach: although sometimes self-made content is also a copyright purchase, but this exclusive buy-out to save a large amount of high royalties. Whether it is Youku potatoes or AiQiYi Art, have mentioned more than once to do (or more than) Netflix.

Netflix, known for its original “Playhouse”, is also trying to avoid the ever-increasing royalties. Netflix had lost thousands of films from Warner Bros. and Universal Pictures because of price discrepancies.

AiQiYi Art from the 2011 on-line first self-made TV series, but it is clear that part of the business from 2014 to really start. Prior to this, Sohu video “Cock Men”, Youku’s “never imagined” has been a fire for a while.

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

AiQiYi Art The first successful homemade program was “Wonderful Flowers”. In 2014, from the CCTV departure, in the love of Fantastic Art as “chief content officer,” Ma Dongla to Gao Xiaosong began the debate program. So far this is the highest variety of network arts, watercress score of 9.0, the second quarter of the traffic has more than 600 million.

But one problem is that competition for AiQiYi Art gradually lost control over the content of self-control. From the above picture you can see, AiQiYi Art is not stable, high-quality content is lost.

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

September 2015, Ma East with wonderful work that the team left AiQiYi Art, opened the production company, “Mi Media”. At the press conference, the investment side of the innovation workshop CEO Kai-Fu Ma Dong a “golden egg”, love Qi Yi CEO Gong Yu said, “We burn gold every day, can not afford to send golden eggs, so send you a cooperation agreement “.

Therefore, the “wonderful work” from the love of Fantastic Art’s “only child” into a “partner”, is an independent content production team. The list of partners is not only AiQiYi Art, there Youku potatoes.

Three years ago, Gao Xiaosong from Youku “transfer” to AiQiYi Art, joined the “studio” program. But this week, Gao Xiaosong’s “Xiaosong Qi talk” has also been announced to stop updating, officially bid farewell to the love of Fantastic Art.

And TV manufacturers cents, is not an easy business

Fantastic Art also wanted to sell their own services to more TV box users.

The video and television bundled sale, the first to do so is music as. This is called to do “ecological” companies from 2009 began to develop and launch TV products.

In 2013, AiQiYi Art and TCL reached a cooperation, released a “Inside cooperation strategy”, launched a preset AiQiYi members of the service television products.

In 2014, millet for AiQiYi Art invested 1.8 billion yuan to create “content ecology” is the millet since the establishment of the largest foreign investment. Millet TV and mobile phones become the priority of AiQiYi Art content distribution channels, AiQiYi Art TV drama appeared in the millet TV, boxes and mobile phones. Until now, millet TV has only left the content from the love of Fantastic Art.

This year, AiQiYi Art directly to foreign investment. In September, the love of Qi to Skyworth’s cool to open the company to invest 150 million yuan, accounting for 5% shares. This is the first investment in TV Fantastic Art TV manufacturers, next year, Skyworth’s Internet TV will be integrated through the Galaxy Internet TV broadcast control platform, preset Fantastic Art VIP membership services.

Looking for companies that produce television and boxes, the video site has a policy opportunity. SARFT’s policy more and more strict, the convergence of television applications are deemed illegal, in addition to the impact of business competition, you want to see everything in a box is basically impossible. For Fantastic Art, to occupy more TV terminals means more points channels.

But the energy subsidies, trade-in policy bonus has disappeared. Coupled with the frequency of replacement of the TV itself is low. Whether millet, music and other Internet hardware companies, or the traditional television industry, it seems that there is not enough profit can be assigned to the video site.

Over the past two years, AiQiYi Art in the membership system to do a lot of attempts

“Wonderful said”, the love of Qi Arts, such as suddenly opened the awakened, 2015, self-made content directly to the company to bring more membership fees.

Youku opened at the end of 2010 on-demand movies, membership subscription monthly viewing and live high-definition live, etc. need to charge the service. AiQiYi Art in the second year on-line members also introduced the area, you can buy 5 yuan genuine movie, buy membership to remove ads.

But members have been unable to bring more value-added services, and then into the mainstream until 2015. The starting point is “Tomb notes.”

South to send uncle and Huan Rui era co-operation TV series “Tomb Notes” only in the love of Fantastic Art on the air. Released the Pilot Set, the 22-hour hits on the break billion, becoming the fastest ever breaking billion play, and quickly become a hot topic, boarded Baidu hot, microblogging hot topic … …

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

Paid members can watch all the episodes at once, and non-members can only wait for a weekly broadcast. This experiment to AiQiYi Art members of the service fire, and even once the background server crashes so that users can not pay.

A few months later, “Shushan war” with a second playback mode, VIP members can pre-empt the first quarter of all the content, after the TV began to broadcast for the general audience of this drama.

Burned four or five years, tried a variety of business models, AiQiYi Art began to talk about how to make money after three or four years

These two plays have brought many members to the Fantastic Art. AiQiYi Art began the first four years, only 500 million paid users. But in 2015 to the present one year to 20 million.

In October 2015, Fantastic Art members of the VIP packaging into a product, positioning the “light extravagance”, invited Yang Yang, Angelababy and Huang Bo do endorsements, advertising in the subway elevator bus.

More resources are also tilting toward homemade content. FantasticArt has announced that 50% of its resources in 2016 will be devoted to member-related services, including the purchase of copyrights, upgrades and self-made content, and the purchase and production of more than 40 members.

“Fantastic Art now has a total of 600 million users, our goal is to turn 10% of them into paid users.” AiQiYi Art at the end of 2015 so.

AiQiYi also stimulated the competition in the member model of competition.

“Tomb notes,” Youku potatoes with 480 million to buy Fan Bingbing’s “win the world”, also followed the “first network background” play.

Youku potatoes in 2015 on the self-made drama is 600 million yuan, after a year this budget is 300 million. They want to create more “never imagined” and “Luo series thinking.”

Tencent video announced this year “8 top quality network drama plan”, and predict that this year, “the industry’s paid membership will reach 1 billion passengers.” 2015 their biggest handwriting is that file simulation “Truman world” reality show “15 of us.”

From the market share point of view of love is also the field of Fantastic Art in front of that home. 2014 Fantastic Art Month active user ranking is still the third, than Youku potatoes and Tencent video low. To 2015 to rise to the first.

But the content of self-made is not large.

Members can bring the income is still very limited. In November, Tencent video announced over the past year the number of VIP members to achieve nearly 300% growth, and love, like Fantastic Art more than 20 million. Youku announced in December this year, paid members reached 30 million.

But not all are purchased on an annual basis, no one is willing to publish the retention situation. Plus a variety of promotions, tens of millions of users, the real number of income can only provide their own website clearly.

Netflix in the United States by paying users alive, but its users have long been accustomed to the credit card monthly automatic deduction of money consumption, usually do not see the renewal fee tips. China side, each renewal is the user may give up.

Ultimately need to answer the question is, whether the video site can provide so many TV drama

Can try the business model, AiQiYi Art has tried it again. And do not bad.

Advertising: It is backed by China’s largest Internet advertising platform.

Paid Members: According to the China Audio-visual Association of Internet data, paid users, including a single purchase of users, accounting for 9.5% of the total number of users of Fantastic Art. This is already the highest proportion of several video sites, Youku potatoes and Tencent video are less than 5%.

But in the end, the money is still unable to support its increasingly high content investment.

As for online education, OEM mobile phones, love the odd headlines … … recent love of Fantastic Art to try and nothing to film and television.

From 2010 to the present, the rely on Baidu, Alibaba and Tencent money supply market can not see any signs of making money.

Several other large companies to promote the industry by burning money, has been less able to maintain. The price of a taxi and take-away than six months ago, many of the so-called O2O industry has basically does not exist.

Perhaps we should ask another question.

Cheap or even rely on advertising to hundreds of millions of people to consume TV drama this matter, is not really sustainable.