Content / Creator EconomyChina
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JOURNEY · DETAIL
iQIYI: The Transformation Journey from a Video Streaming Website to a Membership Model and AI-Driven Content Production
Founded: Gong Yu · Beijing iQIYI Science & Technology Co., Ltd. (iQIYI)
JOURNEY
Key Fields
FIELD STAMPSIndustryContent / Creator Economy
RegionChina
ScaleGiant
ChannelOther
Origin
In 2010, China's video streaming industry was still in a chaotic phase of piracy and aggressive advertising. Gong Yu, with a background at Baidu, recognized the value of licensed long-form video and professional content, and founded iQIYI, entering the market with high-definition and authorized content as its selling points. Early on, it relied on search engine traffic guidance and brand advertising for monetization, but high copyright procurement costs made profitability a distant prospect, forcing the team to find a sustainable business model.
Milestones
2010
Launch Phase Turning Point
iQIYI officially launched with traffic support from Baidu, focusing on high-definition, authorized long-form video and initially relying on brand advertising revenue. However, the domestic video industry experienced intense copyright wars in 2010, and iQIYI was also embroiled in multiple copyright lawsuits. With high content costs and insufficient user engagement, advertising alone could not cover procurement costs, forcing the company to explore paid membership paths.
2015
Membership Initiation Inflection Point
iQIYI introduced a differentiated membership strategy, attracting paying users through self-produced content such as The Lost Tomb, and its subscriber count exceeded 10 million in Q4 of that year. However, as content costs continued to climb from 2014 to 2015, net losses exceeded RMB 2 billion, making the company realize it must rely on high-quality self-produced content and exclusive copyrights to drive paid conversion, establishing the membership system as its core strategy.
2018
US IPO Growth
iQIYI went public on NASDAQ with an offering price of USD 18, raising approximately USD 2.25 billion. Revenue in its IPO year exceeded RMB 24.9 billion, but net losses still reached RMB 9.1 billion, mainly driven by content and bandwidth costs. Pressure from the capital markets forced iQIYI to accelerate efforts to increase membership ARPU and content industrial efficiency, while also deploying self-produced variety shows, dramas, and other multi-category content.
2022
First Profitability Turning Point
After years of 'burning cash for market share,' iQIYI achieved its first single-quarter profit in Q4 2022, with full-year revenue reaching RMB 29 billion and a net profit of approximately RMB 350 million. This was driven by refined operations, cost reduction and efficiency improvement, and hit self-produced dramas such as A Lifelong Journey and Love Between Fairy and Devil. The dual engines of membership and advertising finally proved viable, though the foundation of profitability was not yet solid.
2026
AI and Decentralization Transformation Inflection Point
In Q2 2026, iQIYI's total revenue reached RMB 6.29 billion with operating losses narrowing by 80%, while announcing a 'AI + decentralization' dual-line transformation: instead of self-developing large language models, it provides computing power, tools, and distribution channels to AI film creators in an attempt to collect a 'toll.' However, the impact of micro-dramas led to sluggish advertising and membership growth in traditional long-form video, putting profitability under pressure once again, and the transformation results have not yet scaled.
Turning Points
- 2015: Launched the membership system, shifting users from free to paid via self-produced content.
- 2018: Listed on NASDAQ, securing capital ammunition but taking on profitability pressure.
- 2022: Achieved first single-quarter profitability, proving the viability of the membership + advertising model.
- 2026: Announced it would stop self-developing large models, shifting toward an AI creator ecosystem and a 'toll' model.
Failures & Pitfalls
- Early copyright procurement burned cash, leading to continuously widening net losses, with losses exceeding RMB 2 billion in 2015.
- Continued losses for multiple years after the 2018 IPO, with net losses reaching RMB 7 billion in 2020, drawing skepticism from the capital markets regarding its business model.
- Following the rise of micro-dramas, the long-form video content ecosystem was impacted, causing the company to slip back into losses in 2025 and leaving profitability insecure.
- The strategy of self-developing large language models failed, forcing the company to abandon proprietary model R&D and turn to external cooperation and creator tools.
关键成功要素
- Persisted with the self-produced content strategy, building user mindset for paid membership through hit dramas and variety shows.
- Continuously optimized content costs post-listing and introduced an industrialized production system.
- Proactively stepped back from the 'center stage' in 2026, opening up AI film and television production rights to creators while positioning the platform as infrastructure.
- Maintained content quality despite the impact of micro-dramas, using AI tools to lower the barrier to creation and expand the supply side.
Lessons
- Profitability cannot rely on burning cash for scale; content cost control and ARPU enhancement are both indispensable.
- Business models must iterate alongside user demand and technological cycles; relying solely on advertising or membership is unsustainable.
- When an industry is disrupted, rather than fighting it, it is better to proactively transform into an enabler and charge ecosystem service fees.
- Self-developing large models is not a cure-all; commercial execution and scenario matching are more important than an arms race in technology.
Core Data
- Total revenue in Q2 2026：RMB 6.29 billion (based on public disclosures, independent verification pending)
- Operating loss narrowing magnitude in Q2 2026：80% (based on public disclosures, independent verification pending)
- Full-year revenue in 2023：RMB 31.944 billion (based on public disclosures, independent verification pending)
- Net profit in 2023：RMB 2.863 billion (based on public disclosures, independent verification pending)
- Subscriber count at the end of 2023：Approximately 103 million (based on public disclosures, independent verification pending)
- IPO fundraising amount in 2018：Approximately USD 2.25 billion (based on public disclosures, independent verification pending)
Competitors / Peers
iQIYI's main competitors in China's long-form video market are Tencent Video, Youku (Alibaba Digital Media and Entertainment), and Mango TV. Backed by the Tencent ecosystem, Tencent Video spares no expense in investments for self-produced dramas and variety shows; Youku relies on synergies with Alibaba's e-commerce and digital entertainment; and Mango TV is known for low-cost, high-return variety shows, boasting a smaller subscriber base but higher profit margins. In addition, short video platforms like Douyin and Kuaishou, alongside micro-drama platforms, rapidly erode user watch time with extremely low production and distribution costs, dealing a dimensionality-reducing blow to iQIYI. iQIYI is currently attempting to differentiate itself from traditional platforms through AI tools and a decentralized creator ecosystem, but whether it can form a network effect remains a challenge.