Domestic long video platforms represented by iQiyi, Youku, and Tencent Video have been struggling to make a profit for many years, but few people have paid attention to how much money they have lost.

Recently, news of large-scale layoffs in the industry has once again attracted attention from the outside world. According to statistics from the Economic Daily, iQiyi, Youku and Tencent Video have burned through more than 100 billion yuan in ten years, and there is still no sign of profitability so far.

Burning money is definitely not a long-term solution, and the future of long video platforms has become increasingly confusing.

What did the 100 billion investment over ten years bring?

The reason why long video websites can't make money is actually very simple: they can't make ends meet. This sentence sounds like "nonsense literature", but what it reflects is the problem that video platforms have never been able to solve: the income cannot offset the cost.

"Involution" is one of the most popular keywords in China in the past two years. If we were to give it a definition, "ineffective competition" might be the easiest to understand.

The original intention of competition is to promote the development of the entire industry in a better direction, but if the direction is wrong, it will not only fail to promote the development of the industry, but will instead fall deeper and deeper into endless internal friction.

The competition between iQiyi, Youku and Tencent Video is largely "ineffective".

For these platforms, the ultimate goal is to compete for traffic. If you want to get traffic, you need popular resources. How to get resources? It's simple, spend money. Some people say that if this money is spent on scripts, special effects, shooting details, etc., it will naturally make the quality of domestic film and television content a step higher, but unfortunately, the road later went astray.

Since 2015, major investors have been pouring into the long video track, and the price of TV drama copyrights has risen sharply. The "2017 China TV Drama Industry Survey Report" shows that the average price of a single episode of top content paid by video websites has reached 7.81 million yuan, which is more than 6,000 times higher than that of "Wulin Wai Zhuan" 10 years ago.

One of the main culprits of the skyrocketing costs is the huge pay of celebrity actors. In response to this problem, in 2018, the Central Propaganda Department and five other departments jointly issued the "Notice on Governing the Problems of Tax Evasion and "Dark Contracts" in the Film and Television Industry with Sky-High Pay", which clearly stipulated the implementation standards for film and television program pay. However, the 160 million yuan pay of a well-known actress revealed in April this year shows that various loopholes still exist.

Actors who only have good looks but lack professional skills take up a large part of the budget for a work, so the budget for screenwriters, costumes, props, special effects, etc. is naturally insufficient. This causes the quality of film and television works to continue to decline, and the audience will not buy into it.

In 2006, the online copyright of "Wulin Wai Zhuan" was sold for 1,250 yuan per episode, and in 2011, the online copyright of "Zhen Huan Zhuan" was sold for 300,000 yuan per episode. After 2017, this figure has soared to 10 million yuan. It is no wonder that video platforms have repeatedly raised membership prices and inserted advertisements in various ways.

But in the past few years, how many works have reached the level of "Wulin Wai Zhuan" and "Zhen Huan Zhuan"? Has the domestic film and television industry as a whole improved or regressed? What did the platform giants' money-burning war finally bring? Perhaps the pessimistic financial reports of iQiyi, Youku and Tencent Video have given us the answer.

Is it easy to pursue the route of producing high-quality films and TV series?

iQiyi, Youku and Tencent Video are aware of the problem of high costs and audiences not buying into the program. Therefore, in the past two years, they have started to control costs through self-produced dramas while improving the quality of content. The success of works such as The Bad Kids also means that audiences are more receptive to this model. Does this mean that the strategy of making high-quality films and TV series can solve the current dilemma of long videos?

Perhaps we can get some clues from the experience of foreign video websites.

Netflix is ​​the most famous foreign film and television content platform. They have taken a completely different route from domestic platforms: no advertisements, no free content, and 98% of their revenue comes from membership subscription fees. However, Netflix has achieved profitability with such a "single" revenue structure.

Netflix's third-quarter financial report this year showed that in the quarter, the global net increase in paying users was 4.4 million, doubling year-on-year; revenue increased by 16.3% year-on-year to US$7.48 billion; net profit increased by 83.4% year-on-year to US$1.449 billion.

So, why is Netflix able to make a profit? Is it because the subscription fee is more expensive than that of domestic video platforms? Obviously not.

The core of a video platform's ability to attract people is naturally excellent content, which is also the key to Netflix's becoming the number one in the streaming industry. From "House of Cards" to "BoJack Horseman", from "Love, Death & Robots" to "Squidward", Netflix has a strong ability to produce blockbuster works, and its influence can always radiate to the world. Take "House of Cards" for example, this drama alone brought 20 million new members to Netflix, and there may not be such an influential work in China in recent years.

At the same time, Netflix's cost control is also very reasonable. In 2018, Tencent Video spent 9 million per episode, a total of 783 million yuan, to obtain the copyright of "Ruyi's Royal Love in the Palace". In comparison, the cost of "Squid Game", which has just become popular all over the world, was only 21.4 million US dollars, about 137 million yuan. The cost difference is so huge (if inflation is taken into account, the gap will appear even larger), which makes people wonder again, where did Tencent spend its money?

However, Netflix's impressive financial report data does not mean that the high-quality film and television production is a smooth road to profitability. CEO Reed Hastings reiterated this year that the road ahead is still long and full of difficulties.

The most obvious difficulty is the epidemic. Although video platforms represented by Netflix can be regarded as "beneficiaries" of the epidemic, this also means that the recent rapid growth is accidental. Netflix stated in an open letter to shareholders in April this year: "As countries lift the lockdown, growth may slow down."

In addition, the epidemic will also have an impact on Netflix's production. Netflix has previously admitted that many of the series aired from last year to this year had already been completed or entered the post-production stage, and this year's content filming in many places has come to a standstill. In other words, Netflix is ​​now largely consuming inventory. In the long run, if the epidemic is not alleviated, then its content broadcast will inevitably be affected.

Another more critical issue is that although Netflix's financial report shows profitability, its cash flow remains unstable.

In 2019, Netflix's financial report showed a net profit of $1.867 billion, but its net cash flow was negative $2.887 billion. This is related to Netflix's cost calculation method: when the content is not online, Netflix will not include its production expenses in the profit of the year, but will count it as a content asset, and after the content is online, it will be amortized over the years. In other words, Netflix's annual content production expenses are actually overdrawing the income of the next few years.

In the 2019 financial report, Netflix's cash expenditure was US$14.61 billion, while amortization expenses were only US$9.216 billion, which resulted in the generation of cash flow and the continuous expansion of Netflix's debt.

The situation improved in 2020, with cash flow reaching $1.9 billion, turning negative into positive, but Netflix executives admitted that this was largely due to the delay of program production due to the epidemic, which temporarily reduced long-term investment. Sure enough, in the second quarter of this year, Netflix's cash flow turned back to -$175 million.

The instability of cash flow has forced Netflix to borrow money to survive. In theory, as long as the income can be kept stable, this business model can be sustained. However, Netflix is ​​also facing increasingly fierce external competition. At present, other streaming platforms in the United States are launching a price war against Netflix: Apple TV+ $4.99/month, Disney+ $7.99/month, Hulu $5.99/month (ad-free version $11.99) subscription prices are all lower than Netflix's monthly price of $8.99 to $17.99.

In addition, other media platforms are also beginning to merge, which will bring new changes to the streaming media market landscape.

Competitors such as Apple, Disney, and Amazon all have other businesses that can support their video business, but Netflix can only rely on itself. Therefore, although Netflix currently sits at the top of the streaming platform, no one can say how long it can stay in this position.

So, since the most successful video platforms today have so many uncertainties, how should long video platforms develop next?

Tuowei may be a path that must be chosen.

Competitors are not just peers

Who are Netflix's competitors? Ordinary people may think of streaming peers such as HBO Max and Disney+, of course, but they are not the only ones.

Netflix executives have repeatedly said that anything other than watching Netflix, from sleep to social media to games, can be considered a potential competitor to Netflix. Therefore, apps that are popular around the world, such as TikTok and Instagram, are also targets that Netflix needs to challenge.

In this context, Netflix chose to develop more businesses. In November this year, Netflix officially included games in its content lineup, and all members can enjoy these games without paying extra.

Netflix does not have many games at present, but one thing is worth noting: many games are adapted from Netflix's own IP. From this we can vaguely see some of Netflix's plans for games. Currently, Netflix still provides some relatively simple mobile games, but this is obviously just an experiment. If the promotion effect is good enough, they may adapt their own IP into a larger 3A game. This is also the biggest potential of Netflix's game business.

Netflix is ​​developing games to improve its usage and entertainment value for users, thereby competing with larger competitors for users, especially the time of young users. An analyst said: "Netflix has always said that games are one of their main competitors. Now they are also making games. Maybe it's just like the saying 'If you can't beat them, join them'."

In China, long video platforms are not only facing competition from each other, short videos are an obvious "public enemy". In order to deal with this difficult enemy, domestic long video platforms have also joined forces.

In April this year, Tencent Video, Youku and other platforms joined hands with more than 500 artists to jointly call on relevant departments to manage the copyright of short video platforms in compliance with regulations. After that, the common film and television editing content on short video platforms was targeted.

The "2021 China Short Video Copyright Protection White Paper" released in June showed that the 12426 Copyright Monitoring Center monitored 13 million original short videos and secondary creation short videos of film and television variety shows, and a total of 3 million infringing accounts were monitored, totaling 14.786 million secondary creation infringements and 4.1631 million original infringing short videos.

On December 15, the China Internet Audiovisual Program Service Association released the 2021 version of the "Detailed Rules for Online Short Video Content Review Standards", which clearly stipulates that short video programs must not contain "unauthorized cutting and adaptation of movies, TV series, online TV series and other audiovisual programs and clips." For long video platforms, this is undoubtedly a major benefit in their competition with short video platforms.

The idea of ​​"join if you can't beat them" is also reflected in these domestic platforms. iQiyi entered the short video track through the express version, and Youku also added a short video section last year. Although Tencent Video has not made much progress, Tencent has never given up its pursuit of short videos, and has successively promoted Weishi and Video Account.

The expansion of long video platforms is also happening. For example, iQiyi has entered the VR track. Similar to Netflix's idea of ​​entering the game market, iQiyi has also chosen to use its IP lineup to expand its territory in the new track, creating VR derivative interactive videos such as "Love Apartment 5" and "Youth With You 2", and also launched a series of VR original works.

Whether it is long or short videos, games, or VR, the Internet is essentially a business of competing for users' time and attention. In order to achieve this goal, it is not surprising that major video platforms launch any business that seems to have nothing to do with video.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.