Premium Service Contributes 1% of iQiyi's Revenue
Guangzhou Daily, 12/11/12
Gong Yu, CEO of Chinese internet company Baidu's (Nasdaq: BIDU) joint-venture online video site iQiyi, revealed recently that 99% of the site's operating revenues come from advertisements, with only 1% coming from premium services. Despite two years of experimentation with paid premium services, Gong said, iQiyi has yet to make any inroads that would enable it to surmount the two major obstacles of online payment and piracy.
Even when viewers are willing to pay, Gong said, payment is a complicated problem. Whereas film and TV programming are generally available overseas for a recurring monthly subscription, the lack of any corresponding business model between banks and internet companies in China mean that viewers in China will have to manually pay subscription fees every month, leading to considerably lower subscription renewal rates. "Overseas, renewal rates are 90% or higher," Gong said. "In China, less than 30% of viewers are willing to manually renew even once."
In addition, Gong said, whereas debit and credit card processing workflows are well-established overseas, a lack of comparable workflows in China means that many users abandon payment after running into problems with their banks' online payment interfaces. Gong cited iQiyi figures showing that less than 10% of viewers who were willing to purchase premium memberships had been able to do so successfully.
Keywords: Gong Yu Internet revenue online video Baidu business model BIDU iQiyi
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