The big news in the tech industry these days is nothing other than the recent layoffs at iQiyi, a Chinese streaming platform based in Beijing and Shanghai.
According to Apollo News, iQiyi’s layoffs involve most departments and most of them were at the director-level and high-paid employees.
IQIYI is the first of three major established video websites in China. The platform has been losing money for more than ten years.
The company’s financial reports indicate that it made a loss of 10.3 billion yuan (equivalent to $1.62 billion) in 2019 and another loss of $7 billion yuan ($1.1 billion) in 2020.
Their market value is down to $4.5 billion this year.
Most of iQiyi’s cost is spent on content creation, including many dramas, simulcasts, and various shows. For three consecutive years, from 2018 to 2020, the cost has exceeded 20 billion yuan. It surpassed 10 billion yuan in the first half of this year.
The major source of iQiyi’s income comes from users’ membership fees. IQIYI’s paid members have exceeded 100 million users, but new member registrations have decreased for three consecutive quarters. The current income is not enough to cover the cost of purchasing content.
The second-largest source of income is advertising fees. However, too many commercial ads can disturb the user experience. There is not much space to grow when it comes to inserting ads.
iQiyi’s layoff is just the beginning of many new rounds of layoffs. There are too many loss-making Internet businesses in China, and even big apps like Toutiao are struggling.