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Chinese video platform iQIYI is rapidly losing out to rival Tencent, latest financial results show.

The Baidu-backed iQIYI reported on Tuesday that that it had more than halved its losses in the three months from July to September that make up the third quarter of its financial year. Net loss attributable to iQIYI was RMB1.2 billion ($173 million), compared to net losses of RMB3.7 billion in the same period in 2019. Losses per ADR share were RMB1.61 ($0.24), compared to diluted net loss of RMB5.04 in the same period of 2019.

Subscriptions numbers, at 104.8 million, were fractionally down. A year earlier the company claimed 105.8 million paying users. And at the end of June 2020 the figure was 104.9 million. The latest total means iQIYI has lost a net 14.1 million subscribers since peak coronavirus lockdown in March, when the company claimed 118.9 million subscriptions.

Revenues were down by 3% to RMB7.2 billion ($1.1 billion), the revenue earned from subscriptions increasing 7% to RMB4.0 billion ($586 million). Advertising revenues fell 11% to RMB1.8 billion ($271 million).

The reduction in bottom line losses was achieved by slashing content investments. These fell 24% year on year.

Lower spending on new content also depressed third party licensing income. Content distribution revenues plunged 43% to RMB392 million ($57.8 million). “The decrease was primarily due to less content titles we distributed to other platforms during the quarter,” the company said.

And while iQIYI is cutting back, its arch rival was gaining ground. Tencent last week revealed that its streaming video services had gained 20 million subscriptions year-on-year to overtake iQIYI and end September 2020 with 120 million adherents.

The iQIYI management says it has learned lessons. “In the coming quarters, we may continue to see fluctuations in the number of subscribers, driven by the normalization of user behavior and content pipeline,” it said in a regulatory filing.

“However, with the valuable insight gained during this period, we believe our capabilities are sharpened in content generation and technology innovation, which have better positioned us to capture greater business opportunities in the future.”

Speaking on a subsequent conference call with financial analysts, the company sounded optimistic about a rebound.

“There was some lack of new content on our platform due to the content release delay and new theatrical movie shortage. The fact that fewer new movies were released in cinemas this year accordingly affected the movie supply. As a result, we launched fewer movies in Q3 compared to the same period last year,” said co-founder and CEO Gong Yu.

“In Q4, we expect some sequential rebound of new movie supply although still not as much as Q4 last year. Specifically, we are very happy to see that one of the most expected movies this year, ‘The Eight Hundred’ just started streaming on our platform from November 1 and became hit immediately. We expect more and more theatrical movies coming online gradually for our subscribers.

“We have high confidence in our premium original content and in-house production capabilities. Most of our over 50 in-house studios will go into full production from the second half of next year. These studios are expected to largely improve both the originality and the diversification of content on our platform and ultimately drive continued growth in our membership business.”

 

 

Its NASDAQ-traded ADR shares closed Monday at $27.77. But after-hours trading indicated a 7% drop to $25.8 per ADR.