China's iQiyi Launches On-Demand Movie Theater Business

iQiyi
The first “Yuke” on-demand movie theater in Zhongshan, Guangdong

The company plans to build physical cinemas in major cities across China.

Beijing-based streaming-video giant iQiyi has launched its first on-demand, brick-and-mortar movie theater.

The cinema, which opened May 11 in China's southern Guangdong Province, is comprised of several mini-theaters, ranging from two to 10 seats, which filmgoers can rent by the hour to watch content streamed from iQiyi's online service.

The company describes its new moviegoing model as "combin[ing] the convenience of an on-demand service with the high-quality audio-visual environment of traditional cinemas." The first theater in Zhongshan features THX-certified Dolby audio.

Over the coming months, iQiyi plans to build more of the on-demand venues, dubbed "Yuke movie theaters," in major cities across China. The revenue generated from the cinema rentals will be included as part of China's official box-office collection, the company said.

“The development of on-demand movie theaters poses an exciting opportunity to increase the strength and overall scale of China’s film industry,” said iQiyi senior vp Yang Xianghua. “iQiyi will take advantage of our strong brand awareness, massive user base, popular content and advanced technology to contribute to the growth of this booming market and extend our premium viewing experience to offline consumers.”

iQiyi will also leverage the physical cinema network to generate concessions sales and retailing opportunities for licensed merchandise related to its content. 

The Yuke model represents iQiyi's first major push into the offline space. The company, which went public on the Nasdaq earlier this year, is believed to be a narrow leader in the Chinese streaming-video market, with an estimated 61.3 million paid subscribers as of March. iQiyi has sizable content licensing deals with partners such as Netflix, Lionsgate, Warner Bros., Fox and NBCUniversal.