Intense Competition in Long Video Platform's First Half

As companies such as iQIYI (NASDAQ: IQ), Mango Super Media (300413.SZ), and Tencent Holdings (00700.HK) have successively disclosed their Q2 2024 or mid-year performance, several major long-video platforms in China have submitted their report cards for the first half of the year. Looking at the data separately disclosed by iQIYI and Mango Super Media, a clear divergence in performance is evident.

iQIYI's Q2 revenue was 7.438 billion yuan, a year-on-year decrease of about 4.7%, with a net profit of 75.916 million yuan, a year-on-year decrease of about 80%. Looking at the entire first half of the year, iQIYI's revenue was approximately 15.366 billion yuan, a year-on-year decrease of about 4.9%, with a net profit of about 741 million yuan, a year-on-year decrease of about 26.4%. On the other hand, Mango Super Media's operating income for the first half of the year was about 6.959 billion yuan, a year-on-year increase of 2.46%, and the net profit attributable to the shareholders of the listed company, after deducting non-recurring gains and losses, decreased by 22.96% year-on-year to 912 million yuan.

Tencent Holdings did not disclose the financial data for Tencent Video separately, but its earnings report mentioned several times that both subscription members and advertising revenue have seen significant growth. As for Youku, it was also not separately listed in Alibaba's latest financial report; however, Alibaba's Greater Entertainment segment's adjusted EBITDA turned from profit to loss.

Journalists learned that the revenue of long-video platforms mainly comes from several aspects, including membership subscriptions and advertising. Many industry insiders believe that the entire industry's membership subscriptions have entered a relatively stable phase, and it will be difficult to have a significant increase thereafter. In terms of advertising, according to CTR's "2024 H1 Overall Advertising Market Growth," media advertising spending on internet sites decreased by 20.5% year-on-year in the first half of this year, while the overall advertising market grew by 2.7% during the same period. It can be seen that the lack of growth is becoming a problem faced by the entire industry, and under this background, the competition for existing market share will undoubtedly become more intense.

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Industry Dilemma

From the financial reports of iQIYI and Mango Super Media, a dilemma can be seen, which is the weakness of the overall advertising market.

Mango Super Media's advertising business achieved an operating income of 1.721 billion yuan in the first half of the year, compared to 1.79 billion yuan in the same period last year; iQIYI's online advertising revenue in Q2 was 1.461 billion yuan, a year-on-year and quarter-on-quarter decrease of 2.3% and 1.5%, respectively. It is worth noting that in the first half of the year, iQIYI's online advertising revenue achieved an overall growth of about 1.5%, which also reflects the weakness in Q2 from another perspective.

Mango Super Media stated that in the first half of the year, although the entire advertising industry showed a certain trend of recovery, the recovery was relatively weak. Looking at the advertising categories, performance advertising was the first to recover, with a more obvious trend, while the recovery of brand advertising was relatively lagging.

The "2024H1 Variety Show Advertising Market Report" released by Jì Rǎng Data shows that the overall number of sponsors (manufacturers) in the first half of this year was 531, compared to 571 in the same period last year; the number of manufacturers sponsoring seasonal programs also decreased by one compared to the same period last year; specifically for platforms, only the programs and customer numbers of CCTV achieved year-on-year growth.

Jì Rǎng Data stated that although the five major satellite TV stations and the four major platforms are still in a leading position in the industry in terms of sponsorship, the overall number of sponsors is declining.Although the "2024H1 TV Drama Advertising Market Report" from Jirang Data indicates an overall increase in the number of sponsors for TV dramas, a comparative analysis by reporters reveals that the number of sponsors for TV dramas is significantly lower than that for variety shows.

The "Overall Growth of the Advertising Market in the First Half of 2024" shows that in the first half of this year, the overall growth rate of advertising expenditure was 2.7% year-on-year, which has slowed down from 4.8% in the same period last year. When divided by media attributes, the decline for internet sites was 20.5%, second only to print media (newspapers -31.4%, magazines -23.9%).

In response to this, Sun Wei, a brand marketing consultant at Tsinghua University, analyzed to reporters: "Affected by the macroeconomy and consumer environment, the advertising industry as a whole is in a downward trend, with the largest share of internet advertising declining the fastest and competition being the most intense. The decrease in advertisers' budgets and the surplus of internet media have led to a significant discount in placement prices, hence the final revenue from the internet has also declined rapidly."

"In the second quarter, intense competition within the industry has a positive significance for the development of long-form video, enhancing its attractiveness compared to other forms of entertainment. We firmly believe that the key to the long-term development of the long-form video industry lies in the continuity of high-quality content supply, as well as the win-win of content quality and commercial returns, which is also the unchanging pursuit of iQIYI." said Gong Yu, the founder and CEO of iQIYI.

Content Performance Drives Membership Business Performance Differentiation

When comparing major platforms, a clear differentiation emerges.

Firstly, in terms of membership subscription business, Tencent Video launched several popular TV dramas, driving the number of long-form video paying members to grow by 13% year-on-year to 117 million people; Mango Super Media's membership business revenue was 2.486 billion yuan, compared to 1.961 billion yuan in the same period last year; iQIYI's membership service revenue in the second quarter was 4.495 billion yuan, a decrease of 9.2% year-on-year and 6.4% quarter-on-quarter, with the revenue for this business in the first half of the year being 9.294 billion yuan, a decrease of about 11.5% year-on-year.

This change is related to whether the platform produces top-tier hit dramas and variety shows. Mango Super Media stated that the continuous rapid growth of the membership business is attributed to Mango TV's long-term focus on high-quality content and membership rights systems. On one hand, hit variety shows represented by "Singer 2024" and "Riding the Wind 2024," and popular dramas represented by "With the Phoenix" and "Happy Parents Group," have significantly driven the rapid growth of membership scale, further confirming the positive feedback loop and development logic between Mango TV's content investment and membership growth. On the other hand, by innovating the membership rights system and launching over 300 membership benefits, they have innovated membership value-added services through methods such as program recording entry tickets, member-customized programs, additional gifts, and exclusive rights for higher-tier members, enhancing users' value perception and willingness to pay, and steadily increasing the Average Revenue Per Paying User (ARPPU) value.

According to statistics from Delta Wen, in the first half of the year, iQIYI aired 61 long dramas (36 of which were exclusive broadcasts), leading in quantity, but the "casting a wide net" strategy did not bring corresponding returns. There was a lack of hit works, and both the number of effective and ineffective dramas aired were the highest among platforms, raising doubts about cost-effectiveness.

In contrast, Tencent Video aired 54 long dramas (29 of which were exclusive broadcasts), but the market performance was more outstanding, with several major dramas taking turns to ignite the market, and producing some popular works that met the tastes of niche audiences, thus收获ing more than half of the effective drama rate, making the first half of the year's performance eye-catching.Additionally, the reporter learned from EntGroup data that in terms of the number of ongoing TV series and their broadcast performance in the first half of the year, Tencent Video had a total of 49 ongoing TV series, with 5 top-tier series making the list, followed by iQIYI with 45 ongoing TV series, and 3 top-tier series on the list. In terms of popularity, Tencent Video's overall broadcast index for ongoing dramas and the average broadcast index for the top 10 are in the leading position, with an overall impressive performance. High-quality content continues to explode, becoming the backbone that drives the entire industry forward.