Chinese streaming firm iQIYI published first quarter results that were better than its previous guidance and a lengthy letter to shareholders asserting that it has the best content model and technology in the sector.

In a regulatory filing, the company said that revenues in the January to March first quarter of its 2021 financial year had grown 4% to RMB8.0 billion ($1.2 billion) and that net losses had been more than halved, falling from RMB2.9 billion in the equivalent quarter of 2020 to RMB1.3 billion ($193 million) this time around.

Subscriptions and membership revenue were both down on the first quarter of last year. Membership revenues were 7% lower at RMB4.3 billion ($658 million), while the subscription figure (including trialists) was more that 13 million down from the end of March 2020, when subscriptions peaked at 118.9 million.

The company says that China’s coronavirus lockdown measures in early 2020 meant that more people were at home watching streaming and that the comparison is therefore not exact.

The latest figures represent a return to growth in paying subscribers in quarter-on-quarter terms. And on that measure, membership service revenue was up 12%, compared with the October to December 2020 period. The company also said that the January to March period was the third quarter in which it managed to reduce content costs.

But the early peaking of subscription numbers under COVID conditions was not the only thing that made 2020 a torrid year for iQIYI. Content supply was disrupted and millions of members canceled their subscriptions. The company endured an attack from a short-selling investment firm that alleged fraud and triggered an SEC investigation. IQIYI’s two biggest rivals were reported to have discussed bids for the company, but then walked away. That left iQIYI alone to raise some $1.6 billion of fresh capital in December through equity and convertible bond issues. Additionally, Taiwan moved to block the company’s operations on the island.

The letter to shareholders explains that iQIYI’s content strategy is focused on high quality entertainment and interest-based categories, not low-value “fast-food.” While its flagship app concentrates on entertainment, its Suike app serves up interest-based content more likely to be created by multi channel networks of creators and key opinion leaders.

It plans to invest in both types, in order to address “a lack of high-quality content,” which it identified as a fundamental problem.

To address the issue, iQIYI aims to build more in-house film and animation studios. It also believes these can beat the industry’s average success rates. It expects to do this by “using intelligent production techniques to assist the optimization of industry rules and improve production efficiency, content production will become more stable, continuous and efficient with higher hit ratio in the future,” the letter said.

Earlier this month, iQIYI told the Reuters news agency that losses could continue for a further five years.
The company also told Reuters that it would not “aggressively” launch in other markets until it has a substantive enough content base. That appears to contradict what it has been telling others in the industry. Earlier on Tuesday, it told an audience of creators that it had recently opened an office in Dubai, making its eighth overseas bureau (after other in the U.S., West Europe, Singapore, Taiwan and Korea.)

On a conference call with financial analysts following the results, the company clarified its international strategy as being currently mostly focused on Southeast Asian territories. It said that its approach so far had been “very disciplined” and that it faces similar problems of a shortage of TV drama and variety  shows.