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Participants

Chang You; Director of Investor Relations; iQIYI Inc

Yu Gong; Chief Executive Officer, Director; iQIYI Inc

Jun Wang; Chief Financial Officer; iQIYI Inc

Xiaohui Wang; Chief Content Officer; iQIYI Inc

Youqiao Duan; Senior Vice President; iQIYI Inc

Xianghua Yang; Senior Vice President; iQIYI Inc

Xueqing Zhang; Analyst; China International Capital Corporation (Hong Kong) Limited)

Lei Zhang; Analyst; BofA Global Research)

Lincoln Kong; Analyst; Goldman Sachs

Maggie Ye; Analyst; CLSA

Presentation

Operator

Thank you for standing by, and welcome to the iQIYI's fourth quarter and fiscal year 2024 earnings conference call. (Operator Instructions)
I would now like to hand the conference over to Ms. Chang You, IR Director of the company. Please go ahead.

Chang You

Thank you, operator. Hello, everyone, and thank you for joining iQIYI's fourth quarter and fiscal year 2024 earnings conference call. The company's results were released earlier today and available on the company's Investor Relations website at ir.iqiyi.com.
On the call today are Mr. Yu Gong, our Founder, Director, and CEO; Mr. Jun Wang, our CFO; Mr. Xiaohui Wang, our CCO, Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our Membership Business; and Mr. Xianghua Yang, Senior Vice President of Movies and Overseas Business.
Mr. Gong will give a brief overview of the company's business operations and highlights, followed by Jun, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session.
Before we proceed, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Potential risk and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. IQIYI does not undertake any obligation to update any forward-looking statements, except as required under applicable law.
I will now pass on to Mr. Gong. Please go ahead.

Yu Gong

Hello, everyone, and thank you for joining us today. Starting from late November, we have observed a significant rebound in business performance across multiple metrics, including net additions of subscribing members and user time spent, along with a reinforced leading position in the total drama viewership market share according to Enlightent data. This was boosted by the robust comeback of our top-tier content.
In just the three months, two of our highly popular dramas, We Are Criminal Police (spoken in Chinese) and Drifting Away (spoken in Chinese) surpassed 10,000 in the iQIYI popularity index, further solidifying iQIYI's unrivaled leadership in the suspense genre. We also enhanced our supply of premium female-oriented content, which is also one of our key content categories, with [Moon Embracer] (spoken in Chinese) exceeding 9,500 and Love Song in Winter (spoken in Chinese) exceeding 9,000 in iQIYI popularity index.
Alongside the strong return of our premium long-form video content, we have made breakthrough in the mini-drama space. Now, our portfolio carries a selection of over 10,000 titles. We have also revamped our products to improve user experiences.
On top of that, we have upgraded our ad placement system to more effectively monetize the growing traffic of mini-dramas. All these efforts have led to swift growth in our user base, and I look forward to what the future holds.
In addition, for operational improvements, we are encouraged by the healthy recovery in consumer sentiment towards quality long-form videos, as evidenced by historical high (inaudible) movie box office performance during the Chinese New Year. This trend reinforced our confidence in the quality long-form video content, and we are optimistic for long-form video industry in the coming year.
As we step into 2025, we aim to boost membership revenue by increasing the quality and the share of streaming content. We also aim to expand the advertising revenue by enlarging our app inventory, which will benefit from the growth of mini-drama business. Together, these two elements will serve as the growth engine driving our revenue growth.
Now let's move on to the details of our core business segments, starting with long-form videos, which is a cornerstone of our content ecosystem. We have sustained our leadership in the core drama category, capturing the highest total viewership market share in Q4 and for the full year 2024 according to Enlightent data. This was underpinning the exceptional performance of our highly acclaimed titles across multiple genres.
In Q4, our dominance in the (inaudible) of suspense genres remain unchallenged. Notably, We Are Criminal Police become the 15th drama to break the iQIYI popularity index score of 10,000 and recorded the highest score of our platform in 2024. Additionally, new releases like Let Wind Goes By (spoken in Chinese) from our Light on Theater brand and Under the Skin Season 2 (spoken in Chinese) garnered high acclaim from viewers.
Our exciting slate of offering goes beyond Q4, notably [building our way] from our flagship Light on Theater brand surpassed a popularity index score of 10,000 within just six days of its release. It was also the first drama with fewer episodes to reach such highs.
In Q4, for premium female-oriented content, we made great progress in stabilizing our content release schedule and captivating audiences with love stories from Love On Theater. Notable among this is Asian custom drama, Fangs of Fortune (spoken in Chinese) which successfully attract new members setup.
In addition, modern drama, Love Song in Winter, was praised for its innovative blend of suspense and romance, hitting our peak iQIYI popularity index score of over 9,000. Looking ahead, we are committed to further refining our production line up and release timing for both Asian custom dramas and modern tales that resounded with our female audiences.
Turning to movies. In Q4, we have maintained our leading position in viewership for self-constructed cultures according to Enlightent data. The performance was highlighted by our original production, [Frozen Wind] (spoken in Chinese) which was the best-performing comedy movie on our platform this quarter. The other releases, like [Upstream] (spoken in Chinese) and Volunteers, The Battle of Life and Death (spoken in Chinese) also secured top positions on iQIYI popularity chart during Q4.
For animations in Q4, our production capabilities for Chinese animations continue to improve. The Legend of Sky Lord (spoken in Chinese) remains its popularity among audiences. We also further boosted our offerings with exclusive new IPs such as Urban Miracle Doctor (spoken in Chinese) and (inaudible) for Japanese animation, we exclusively released Dragon Ball DAIMA on our platform, receiving positive feedback.
Looking forward to 2025, we are dedicated to enhancing the production and the management of our long-form videos. Our primary goal is creating exceptional content, elevating its commercial potential while optimizing the production and the distribution process for increased efficiency. For dramas, we will focus on improving the pipeline capability and the share of our top-tier premium content.
We aim to strengthen our leadership in realistic and suspenseful themes while enhancing our premium content that appeals to female audiences, which have shown strong momentum. Other than the titles previously discussed, such as Drifting Away, we are also going to release titles from like Light on Theater, including Breaking the Shadow (spoken in Chinese), Justifiable Defense (spoken in Chinese), A Life for a Life (spoken in Chinese), and Low IQ Crimes (spoken in Chinese).
Our strong lineup also features highly anticipated female-oriented dramas, Moon Embracer (spoken in Chinese), The Fearless Season 2 (spoken in Chinese), and Love of the Divine Tree (spoken in Chinese) have already been released and have gained strong traction among female audiences, while more compelling releases to come.
For variety shows, our strategy is centered on profitability. We are committed to maximizing the commercial value of our classic IPs while exploring innovative new shows. For flagship multi-season IPs, our strong lineup includes Become a Farmer (spoken in Chinese), Five HA Season 5, The Rap of China 2025, and The Kind of Stand-Up Comedy 2 (spoken in Chinese).
We are also introducing several fresh new IPs, including The Blooming Journey (spoken in Chinese), [Sing Asia] (spoken in Chinese), The Greatest Showman (spoken in Chinese). Notably, The Blooming Journey was released in January and quickly received a peak iQIYI popularity index of above 8,000 while topping the Enlightent rankings.
For the comedy genre, building up the success of The Kind of Stand-Up Comedy, last year, we launched a spin-off show Happy Off Work during the Chinese New Year holiday, further strengthening the IPs interest. For movies, premium content is our top focus, especially original theatrical releases that can generate top box office revenue.
In 2025, our original movie Winter to Summer (spoken in Chinese) and (inaudible) will hit the theaters. Audiences can also enjoy theatrical hits on our movie champions, including Her Story (spoken in Chinese), Burning Star (spoken in Chinese), Hot Pot Artist (spoken in Chinese), and Octopus with Broken Arms (spoken in Chinese). We also plan to increase our production capabilities for online films.
In the field of animation, we are planning to broaden our collection of enduring, serious, and devoted resources specifically to high-quality Chinese animation. Our objective is to raise both the quality and financial performance of our original work.
Major titles to be launched include Super Cube (spoken in Chinese), Over the Divine Realms (spoken in Chinese), The Fated Magical Princess (spoken in Chinese), and the sequels to beloved children's animations, including [The Rufus] (spoken in Chinese) and Princess Doremi Season 4 (spoken in Chinese).
Moving on to mini-dramas, we achieved exciting milestones in just three months. Firstly, we have successfully revamped our apps. Now, the mini-dramas in the iQIYI main app focus primarily on subscription-based models, while the iQIYI Lite app provides all key dramas, free mini-dramas supported by advertising models.
Secondly, we have largely completed the construction of back-end systems, especially for content recommendations and advertising capabilities. This not only elevates the viewing experience, but also unlocks fresh monetization opportunities.
Furthermore, our mini-drama portfolio has quickly expanded to over 10,000 titles now, capturing 95% of the leading mini-drama content providers in the market. This expansive and diversified content portfolio has paved for our next stage of development.
The recent program has largely increased our user base and the viewing time spent on mini-dramas in the fourth quarter, with these positive trends expected to continue. Notably, in December, our platform had its first mini-drama generating monthly revenue sharing income exceeding RMB1 million.
As we enter the next phase, we are aiming to refine our products and service offerings with personalized recommendations, finetune our advertising systems to appeal to a broader base of new advertisers, broaden our content catalog with fresh and elaborate titles, and cultivate iQIYI's original mini-drama ecosystem to provide a steady stream of high-quality content.
Moving on to membership services. Membership revenue in the first quarter was RMB4.1 billion, down annually and sequentially primarily due to a lighter content slate during the first two months of the quarter. However, starting from late November, we have observed a strong comeback in premium content offerings, as previously discussed, driving a significant turnaround in our membership business.
To be specific, we have improved our long-form video content and introduced exclusive mini-drama for members, aiming to improve member retention and attracting new subscribers. Additionally, we have maintained a tighter supply of premium content and stepped up our promotional efforts so subscribers can eagerly anticipate new releases, thereby driving their loyalty to our platform.
Beyond content enhancement, we have reclassified our membership offerings into two primary categories, one category tailored for individuals, the other for families. Both categories include an ad-supported basic service tier as well as a standard service tier.
Moreover, the family category also features a premium service level, which is the ad-standard plan. This plan grants additional privileges, including unlimited access to express packages that provide early access to finals of our premium content, the ability to log in on up to eight supported devices, and opportunities to participate in major offline events.
This week's classification benefits are membership building in multiple ways. One, it simplifies the structure of our membership plan, making their positioning clear. Two, it captures broader user needs and user groups, from value-seeking individuals to those desiring more premium perks. Three, it effectively addresses the issue of unauthorized password sharing.
In the first quarter, to offer an improved solution to account sharing, we introduced the extra member feature. Additionally, our ad-supported basic plan has seen a consistent uptick in subscriptions, especially among users in low-tier cities and within the young demographic throughout the quarter. In a move to further elevate the value we offer, we also introduced more joint membership options, which gained traction with our members.
Looking into 2025, our strategy focuses on building a membership business that better caters to mass audiences. We also intend to optimize member offerings, streamline operations, and improve distribution channels. Moreover, we aim to elevate the iQIYI member brand and service standards, ultimately boosting the value experienced by our members.
Moving on to the advertising business. Revenue during the quarter came in at RMB1.4 billion, growing 7% sequentially and showing a reduced rate of annual decline when compared to the prior period. For brand ad revenue show, a double-digit sequential growth. This was primarily driven by the double-digit brand ad revenue growth generated by our premium drama.
In 2025, we aim to evolve our brand advertising business by diversifying our revenue streams and exploring new, innovative advertising opportunities. We plan to refine client service, which will help retain our current advertisers and attract newcomers from sectors like food and beverage, cosmetics and toiletries, and communications.
We will also keep an eye on emerging sectors such as healthcare, home furnishings, and tourism. Additionally, we aim to increase the arc of healthcare clients and explore opportunities in mini-dramas and advertiser-customized shows.
Performance ads continue to grow both annually and sequentially. This was largely driven by operational improvements and major e-commerce campaigns and the robust service provided to clients from the internet services sector.
Notably, revenue contributions from the e-commerce sector during the 11.11 Shopping Festival increased by over 40% annually, and the revenue from the internet services during the quarter increased by over 30% year over year.
To sustain this momentum, going forward, we are enhancing our technical and platform capabilities to secure a larger share of budgets from healthcare clients in sectors such as e-commerce, internet services, and video game sectors. We will continue leveraging AI for video and production and expand our clients to improve monetization efficiency. We are also excited about the incremental ad inventory that mini-drama could bring in 2025.
Moving on to technology and products. We continue to advance the industrialization of the video business, thereby improving our operational efficiency. Our intelligent production management system has become essential for production crews managing various tasks on site, providing them with advanced production tools and management capabilities.
In the first quarter, we further enhanced the system to incorporate highly efficient production supply management capability. With regard to virtual production, we have increased the technology to push the boundary of content creation. We are proud that our projects Fangs of Fortune and My Journey to You (spoken in Chinese) have both won multiple prestigious industry awards for their excellent use of virtual production.
Meanwhile, we have made impressive progress with our digital asset collection. Throughout the year, we have assembled an immense digital asset library from hundreds of dramas, variety shows, movies, and animations. iQIYI is recognized as one of the leading collections in China.
We are now leveraging their assets in new video projects and expanding into offline experiences. Looking forward, we are setting our sights on wider applications, including content creation, IP value-added services, and immersive virtual reality experiences.
Moreover, we have been expanding AI applications across content production and operations. AI's influence has been transformative, notably in refining our project assessment process, providing valuable insights for appraising nearly 5,000 screenplays and novels. Additionally, AI aids in character design and custom selection as the project approval stage based on the character description from screenplays, thus streamlining the creative process.
Lastly, for our business performance in regions outside of mainland China, we maintained solid performance in the first quarter with both total revenues and membership services revenue gained annual and sequential growth. Notably, membership revenue from Hong Kong, UK, Thailand, and Australia grew by over 30% year over year.
The average daily number of subscribing members also increased both annually and sequentially, with Hong Kong and Thailand growing over 50% year over year. The popularity of our original content continues to strengthen.
Fangs of Fortune was the best-performing China drama on our overseas platform in 2024, with a Thai-dubbed version topping the viewership rankings in Thailand. Additionally, our first original overseas variety show, Starlight Boys, extended its success beyond our platform, achieving top positions in local Google rankings for variety shows across numerous Southeast Asian countries.
Furthermore, Thai dramas have emerged as a popular content category on our international platform, ranking second only to C-dramas. Encouraged by this trend, we are planning to increase our investments in original Thai productions.
We have been focusing on expanding our international brand recognition through region-specific events. Last quarter, we launched our first-ever iQIYI conference overseas, which set a new benchmark as the most comprehensive and best-attended press conference ever hosted by our Chinese video platform in Thailand, with exceptional artist participation.
As we set our eyes on 2025, our main focus abroad will be to drive revenue expansion. We plan to enhance our C-drama offerings and improve the monetization ability of region content.
Having established a strong presence in Asia, especially Southeast Asia, we are set to expand our footprint into the Middle East, Latin America, and Brazil. Our approach includes reinforcing ties with telecom partners; seeking innovative, collaborative opportunities; and wrapping up marketing initiatives to boost our brand and content impact.
In summary, we closed the year by embracing a series of reinventions and innovations that successfully propelled our business forward, setting a strong start to 2025. We are confident that the strong comeback of premium long-form videos, coupled with our continuous innovation in mini-dramas, will serve as fuel engines during the tentative growth for 2025.
Now, let me pass it on to Jun to go through our financial performance.