Filmart: iQiyi's Tim Gong Yu on Netflix, Expanding Globally and Why the Chinese Market is "Unpredictable"

Tim Gong Yu - Getty - H 2019
Jacopo Raule/Getty Images

The tech and entertainment tycoon offers a post-mortem on his company's partnership with the U.S. streaming giant and how the somewhat battered state of China's film industry is actually boosting his company's core business.

If not yet the undisputed king of China's streaming sector, iQiyi CEO Tim Gong Yu is consistently considered the Middle Kingdom's market leader.

As of January, iQiyi, founded by Gong in 2010, was China’s most popular streaming platform based on time spent, with 645 million hours watched, topping the totals of rival video giants Tencent and Alibaba's Youku, according to data compiled by Bloomberg.

Often compared to Netflix, iQiyi is a much more diversified platform than its U.S. counterparts. The company operates a core subscription service — which counted 87.4 million paid subscribers at the end of 2018 — but it also maintains a major ad-supported video service, a growing gaming business, internet literature and comics platforms, and e-commerce for entertainment-related merchandise.

In April 2017, Gong negotiated Netflix's first major licensing deal in China, bringing a raft of originals from the U.S. streamer to iQiyi, including Stranger ThingsMindhunter and Ultimate Beastmaster. As part of the deal, Netflix also streamed a limited number of iQiyi's original series.

During Hong Kong's Filmart content market, THR caught up with Gong for a quick chat about Qiyi's international ambitions, the status of the company's relationship with Netflix and how the recent "cold winter" in China's film industry has played right into his hands.

Among the various content channels iQiyi operates within its service, which are you emphasizing most for growth in 2019?

Revenue from our subscription video business continues to grow, and this is our priority in 2019. We also acquired the gaming company Skymoons last summer [in a deal valued at $300M], so expanding our gaming operations is something we will continue to push. Skymoons is very strong in mobile gaming, and we can developing gaming IP into film and TV series, and also develop more mobile games from our popular original video content. Our vision is always to be a full entertainment ecosystem in this way. 

For the U.S. streaming giants — Netflix, Amazon and Hulu — future subscribers now come mostly from international markets. So far, China's streaming companies have stayed home in their enormous domestic market. Is an international launch in iQiyi's future someday?

For Chinese video platforms, we face difficulties because most of our original content is in Chinese and geared to the Chinese mainland audience's tastes. So we are cautiously considering overseas business. We entered the Taiwan market three years ago and we have used it as our pilot market as we prepare for expanding our overseas business. So far, we haven't felt competition from Netflix and the other U.S. services because they obviously aren't in China, but when we enter the international space, that will change — we will be competitors, if it is for the overseas Chinese-language audience or other users.

What's the status of your partnership with Netflix? Is that still ongoing?

Our partnership with Netflix has ended and the results weren't really as good as we had expected, because so many of Netflix's originals couldn't pass the Chinese government's regulations on content. We had hoped to share a lot more content with one another than we ended up exchanging on our platforms. [Netflix's adult animation Bojack Horseman was pulled because of censorship issues shortly after iQiyi launched the series on its platform in June 2017].

There has been a lot of talk in the Chinese movie business about a coming so-called “cold winter,” caused by last year’s tax crackdown and capital flight from the film industry. This has been accompanied by a slowing of overall growth in the Chinese economy. Has this affected your business in any way?

Yes, these factors are affecting the industry. But we haven't felt a negative influence at all, rather our company has enjoyed some benefits, because when we negotiate with local content producers we now have a stronger bargaining position. 

What are some highlights of the original content that you have in the pipeline that you are especially excited about?

I've stopped saying which original shows and films I have the biggest expectations for. By the end of the year, there is a good chance the content that I'm most excited about will have fallen flat, while some of our other new originals will have attracted a huge audience in China. Even for me, the Chinese audience is consistently unpredictable. [Laughs.] We are using big data to analyze and forecast these things, and the results are much better than my predictions.

Your parent company Baidu is world-famous for its advancements in Artificial Intelligence. Applied AI has been a big part of iQiyi's ambitions since the beginning. What are some of the cooler things you are working on in this area?

Well, aside from big data analysis to more deeply understand the relationships between our users and our content, one thing that might be interesting for film lovers is the film restoration work we are doing with AI. For a full film restoration — or upgrading a film's color and quality from analog to 4K — it would traditionally take 20 people to restore one classic feature film. With the our AI system, it takes just one machine approximately five days to finish a full restoration. We are using AI to do these things and it has been very successful. 

Aside from your brief Netflix licensing partnership, you worked with Sony Pictures Television to co-produce a premium Chinese-language miniseries, a remake of U.S. hit Chosen. Do you have further plans or ambitions to collaborate with U.S. studios on content?

Well, we remain partners with all six of the major studios, by regularly licensing their content for our service in China. When we eventually launch our service internationally, we will definitely work with the Hollywood studios on more content. But this is something we are thinking about very carefully, and it is a longer-term goal — there is no timeline yet.