iQiyi’s CEO Responds To Youth With You 3’s Vote Controversy Involving Milk Wastage

Recently, iQiyi’s CEO addressed questions on the voting controversy surrounding milk wastage for Youth With You 3.


What Was The “Milk Pouring” Controversy In Youth With You 3 ?

The video of fans dumping milk from bottles was recently exposed and became viral on Weibo. This a Youth With You 3 vote controversy as the public felt that the show was indirectly involving the waste of resources.

The reporter learned that in the post-conference call of iQIYI’s financial report, Gong Yu, CEO of iQIYI, mentioned that the relevant departments have cleared necessary requirements at present. Should the voting for future talent shows can only be free, the impact on iQIYI’s advertising revenue would have to come evaluation.

The CEO answered, “Yes, but it won’t be very Big.”

Fans bought milk from iQiyi’s sponsors to cast votes for their idols, but never got to drinking it, resulting in the Youth With You 3 vote controversy

Today, iQIYI released unaudited financial reports for the first quarter ended March 31, 2021. According to the financial report, in the first quarter of 2021, iQIYI’s total revenue reached RMB 8 billion (about 1.2 billion US dollars), an increase of 4% year-on-year; the net loss attributed to iQIYI was 1.3 billion yuan (about 193.4 million US dollars), which was 55% narrower from the net loss of 2.9 billion yuan in the same period last year.

By the end of the first quarter, the number of iQIYI subscription members reached 105.3 million, the subscription membership in the first quarter increased by 3.6 million month-on-month, and the revenue of membership service increased by 12% month-on-month. Behind this, it is inseparable from the driving of popular online variety shows such as the solo drama “Duty” and “Youth With You 3” launched in the first quarter.

However, behind the huge talent show, the milk dumping incident was exposed, the chaos in the fan circle was pushed on the hot search, and the platform fell into a huge controversy. Netizens accused that the voting setting is directly bound to sales. It seems that the ranking is to test the public acceptance and commercial value of the draft contestants in a market way with the input of fans, but it is actually equivalent to driving sales in disguise. Behind the list of fans, the domestic “fan circle” economy has fallen into a deformed state.

On the evening of May 6, iQIYI’s official Weibo published an apology for the “milk pouring video” and announced the rectification measures of “Youth With You 3”, including the suspension of recording and live broadcast on the group night originally scheduled for May 8. Mengniu Dairy’s official Weibo page also posted an apology on Weibo, saying that they “firmly opposed all forms of food waste.” They also stated that they “apologize for the adverse social impact caused by this, and will reflect deeply and take active action to rectify and earnestly fulfill their social responsibility, and avoid the recurrence of such incidents.”

On May 10, the Beijing Radio and Television Bureau issued the Notice on Further Strengthening the Management of Network Variety Programs, requiring that no “spending money to vote” link should be set up in the program, and it is strictly forbidden to deliberately guide and encourage netizens to use material means such as shopping and becoming members to vote for contestants. It is strictly forbidden for any institution or individual to carry out data fraud and interfere with program selection in the form of “spending money on tickets” and “raising funds to fight investment”.

Impact of Variety Shows on iQiyi’s Revenue

Previously, Bank of Communications International had predicted in its report that top variety shows such as “Fantastic Talk 7” and You With You 3 would drive iQIYI’s advertising revenue to increase by 1% month-on-month and 22% year-on-year. With the suspension of buying tickets and playing on the list, how to explore the commercialization of the talent show will not only affect iQIYI, but also have a certain impact on the entire video industry.

Although the income of members and subscribers have increased month-on-month, there has been a certain decline year-on-year. In the first quarter, iQIYI’s membership service revenue was RMB 4.3 billion (about $658.1 million), a year-on-year decrease of 7%. The number of subscription members of iQIYI decreased from 119.9 million as of March 31, 2020 to 105.3 million as of March 31, 2021.

This is partly affected by last year’s COVID-19 epidemic. The online entertainment industry, including online video, has ushered in a wave of large-scale payment user growth, but whether the platform can continue to retain these users in large quantities is at risk.

On the same day’s financial report teleconference, when Gong Yu, CEO of iQIYI, was asked about the fluctuation of the number of members, he mentioned that when the video industry lacks content, the number of members declines, and when the content is sufficient, there will be an influx of paid members. The content in the third and fourth quarters of this year is higher than that in the first half of the year.

In terms of revenue, in addition to member revenue, advertising revenue reached RMB 1.9 billion (about 292.5 million US dollars) in the first quarter, an increase of 25% year-on-year. Thanks to the macroeconomic recovery, the brand advertising budget and the number of brand advertisers have rebounded.

In addition to membership and advertising revenue, iQIYI’s content distribution in this quarter achieved revenue of RMB 7791 million (about 1. $18.9 billion), up 29% year-over-year, as iQIYI released more content to other platforms in the quarter. Other revenue contributed Rmb961 million (about $146.7 million) in the first quarter, up 10% from the same period last year.

iQiyi Discussed Alternative Investment Plans

In terms of investment, iQIYI affiliates began to invest in new consumption. In the first quarter, it invested in Daily Black Qiao, with a shareholding ratio of 5.2%, becoming the seventh largest shareholder of Daily Black Qiao.

As an industry that has not yet achieved profitability in ten years, iQIYI’s net loss has narrowed, mainly due to the decline in content cost and bandwidth cost. Of this, the cost of content in the first quarter was RMB 5.4 billion (about $829.6 million), down 8% compared with the same period in 2020. The decline in content costs is mainly due to the decline in the cost of copyrighted content. In addition, sales, general and administrative expenditure and research and development expenditure all declined year-on-year in the quarter.

Not long ago, Gong Yu mentioned in a public speech that the film and television industry was a “poor temple with many rich monks.” The saying explained that many people made money, but the enterprise platform was losing money. There are many problems in the film and television industry, such as poor controllability of the project cycle, problems in film and television project management, lack of objective standards, simple and large duplication of workload, etc. In addition, the short video industry has a lot of competition for user time, which has an impact on long videos.

Gong Yu believes that the way to break the situation is film and television industrialization, including industry rule reconstruction, intelligent production, etc.

Today, iQIYI also issued a letter to shareholders for the first time. The shareholder letter mentioned that in response to how to solve the problem of “high-quality content shortage”, iQIYI said that in the future, it hopes to achieve a high probability of high enough popularity by continuously improving the quality of content, and establishing sufficient and effective internal studios is an important prerequisite for content quality improvement.

The shareholder letter also mentioned that iQIYI mainly focuses on two video types, one is entertainment video, the other is interest video.

IQIYI expects total net revenue in the second quarter of this year to range from 7.21 billion yuan (about 1.1 billion US dollars) to 7.65 billion yuan (about 1.17 billion US dollars), which is equivalent to a year-on-year decline of 3% to 3% increase. This expectation is tentatively formulated according to the current situation of iQIYI. In the future, it can It can be adjusted.

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