Q4 2019 Earnings Call

February 28, 2020

Operator 2: Ladies and gentlemen, thank you for standing by, and welcome to the iQIYI Q4 and fiscal year 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, press star one on your telephone. I must advise you that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Investor Relations Director of iQIYI, Dahlia Wei. Thank you. Please go ahead.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the iQIYI Q4 and fiscal year 2019 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, press star one on your telephone. I must advise you that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Investor Relations Director of iQIYI, Dahlia Wei. Thank you. Please go ahead.

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Dahlia Wei: Thank you, operator. Hello, everyone, and thank you all for joining iQIYI's Q4 and full year 2019 Earnings Conference Call. The earnings results were released earlier today and are available on the company's investor relations website at ir.iqiyi.com. On the call today are Dr. Yu Gong, our Founder, Director, and CEO, and Mr. Xiaodong Wang, our CFO. Dr. Gong will give a brief overview of the company's business operations and highlights, followed by Xiaodong who will go through the financials and guidance. After their prepared remarks, we will hold a Q&A session. Before we proceed, please note that discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from current expectations.

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Dahlia Wei: Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statements except as required under applicable law. With that, I will now turn the call over to Dr. Yu Gong. Please go ahead.

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Yu Gong: Hello everyone, and thank you for joining us for our Q4 and full year 2019 earnings call. We concluded the year 2019 with a solid ending. Q4 and the full year net revenue reached RMB 7.5 billion and RMB 29 billion respectively, backed by the optimized structure of our content cost, which only grew moderately at a single-digit percentage on full year basis. We further solidified our industry leading position in terms of our user scale, user stickiness, and the number of subscribers. We are pleased with a set of significant progress we made in 2019, including being the first among industry peers to hit the 100 million subscribers milestone, consistently developing innovative original content, pioneering new advertising solutions, and making new breakthroughs in technology development. I'll start my review with our membership business.

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Yu Gong: As of 31 December 2019, our total subscribers reached 107 million, a net addition of 19.5 million compared to year-end 2018. Subscription revenues grew 36% year-over-year to CNY 14.4 billion, and contributed half of our full year 2019 total revenues. This reflects our dedication in delivering better quality content to our subscribers and our various operating initiatives to expand our subscriber base. In Q4, the release of a number of highly popular drama series drove subscriber growth, namely, "The Listener," "Sword Dynasty," and "Spirit Sword Mountain," among others. Typically, drama series have been the main driver of the subscriber growth. With our portfolio of content expanding, we are beginning to see a wider range of content categories playing an increasingly important role.

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Yu Gong: For example, hit theatrical movies such as Ne Zha and The Captain, animation series, One Piece, as well as a premium variety show, More Than Forever, all helped drive subscriber growth. Also, if we look at full year 2019, we saw some of our library content demonstrating long-term values. Our licensed blockbuster dramas, Story of Yanxi Palace and The Mystic Nine, which are 2 years and 4 years old respectively, still consistently ranked among the top contributors. This enforces our belief in the intrinsic value of premium original content, which will become classics over time, and will take up an increasing share of our content library.

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Yu Gong: During Q4, we introduced value-added membership service for some of our content, including Spirit Sword Mountain and Qing Yunian, whereby subscribers can enjoy advanced access to additional episodes at a premium level of packaged all-you-can-eat experience. This was the first time we offered such service for our subscribers, and so far, we have seen encouraging results. Going forward, we intend to further optimize our membership system, provide premium services and entertainment experiences to subscribers who are willing to pay for extra privileges to improve overall monetization. We continued our efforts to penetrate into low-tier cities. We utilized AI and big data technologies to cultivate content offerings that are more appealing to user demographics in these regions. We also rolled out various marketing campaigns to promote brand awareness in lower-tier cities.

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Yu Gong: Moreover, we are actively working with numerous cross-industry partners to tap into local markets through a wide range of cooperation channels. These partners range from telecom operators, banks, e-commerce platforms, to fast food franchises, and the retail chain stores, among others. Leveraging their strong local presence in hundreds of low-tier cities, we are able to expand our user reach and improve subscriber conversion. Moving on to our advertising business. Overall, 2019 was a tough year for the broader advertising markets due to the challenging macro and the competitive environment. Nevertheless, we tried to mitigate the impact of this headwind by adapting and upgrading our advertising products, better leveraging the strength of our content, and expanding our advertiser base.

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Yu Gong: For brand advertising, by covering our content strength and advertising creativity, we have launched numerous new formats of embedded ads, innovative ads, sponsorship ads, and, as well, to better cater to advertisers' needs. For example, in the Q4, our original fashion-themed reality show Fourtry attracted over 10 leading brands, including Vivo, Lancôme, Pepsi, and the e-commerce platform Mogujie.com, to advertise with us, which not only enhanced their brand awareness, but also boosted their sales volume. For performance ads, we saw continued revenue rebound in the Q1, although from a relatively small base. Leveraging our massive user traffic, abundant data, and AI algorithms, view ads and in-feed ads continue to serve as dual engines for growth.

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Yu Gong: In 2020, we will dive deeper into more recent length and promising advertising sectors such as e-commerce, education, finance, and internet services to assist potential growth opportunities. Aside from membership and advertising revenues, our other revenues on a combined basis grew 30% year-over-year and accounted for a record 13% of total revenues in 2019, compared to 11.5% in 2018. This illustrated the continued progress we are making towards building a diversified business model. Our game business performed particularly well with the launch of a number of successful new games, such as The Crews and The Death of Last throughout the year, which drove strong organic revenue growth.

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Yu Gong: Our new mobile game, Re: Life in a Different World from Zero - Infinity, which was adapted from a popular animation series, was launched last month and has attracted a large number of DAU users. Other smaller businesses that we are incubating, such as live broadcasting, talent agency, digital literature, and IP licensing, have benefited from the significant synergies created by our content ecosystem and our natural expansions of our IP-based development value chain, which leads to the next part of my discussion on content. During Q4, we continued to focus on delivering high quality content and achieved a number of big swings in the creation of original content. According to Enlightent, the third-party marketing survey, we outperformed industry peers once again in terms of video views for both drama series and variety shows during the quarter.

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Yu Gong: For full year 2019, we released quite a number of blockbuster dramas, covering themes that vary from suspense, romance, and family life to military, reality, and many more. The best performers of the year, including The Stronger, Go Go Squid!, and A Little Reunion, as well as the aforementioned Joy of Life and Spirit Sword Mountain. The popularity of these titles demonstrates our growing ability to identify and deliver premium content across numerous verticals. We replicated the success with the recent launch of the exclusive hit drama, iPARTMENT Season 5, which attracted over 38 million subscribers to watch it within the first week of debut, together with The Great Ruler, an original custom drama launched in late January.

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Yu Gong: This popular content will help drive subscriber growth. For variety show, in Q1, we released season six of our flagship talk show, Qipa Talk, which is the longest lasting web show in the industry. From that, we now have a proven track record of consistently releasing sequels of our top variety shows, including Qipa Talk, The Rap of China, as well as highly anticipated return of Idol Producer Season Three, which will take place this quarter. We are continuously building strong IPs of multi-generation shows and drive significant long-term value for us. On the other hand, we would like to highlight our consistent innovation around the developing new themes and the new formats of variety shows content. Our 2019 new shows, The Big Band and Fourtry, have both garnered overwhelming success.

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Yu Gong: Let me take Fourtry, the star-studded original fashion reality show, as an example. Leveraging its pop culture appeal and the growing influence on fashion trends, we launched our own fashion brand, Fourtry, and developed over 207 core branded SKUs to embrace the new consumption trends in the market. This multidimensional development process will help us maximize the IP commercial value and will act as an incremental driver for long-term growth. Looking ahead to 2020, we have forged a robust pipeline of premium content, including over 100 major dramas, over 30 variety shows, as well as 20 original animations and comics. This top line not only covers highly popular mainstream shows, but also expands to various new content runways that appeal to even more diversified user groups.

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Yu Gong: Content innovation is at the core of our strategy, and talent is the key to content creation. In 2019, we entered into partnership with high-profile academic institutions, including Beijing Film Academy and Shanghai Theatre Academy, among others, to cooperate on educational programs, which will expand our talent reserves and nurture their creativity. At present, we have over 40 internal studios focused on different content genres and are also contributing to the industry content production ecosystem. Moving on to the technology. Technological innovation has always been a cornerstone for our business. Driven by AI-based technologies, we are able to continually enhance our user-oriented entertainment service platforms and explore new and innovative ways to improve content creation, content distribution, and monetization.

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Yu Gong: In Q1, we launched an innovative AI application called AI Reader, which supports the real-time recognition and search of information from visual image, and also provides user with an interactive feature to directly buy our pro-products while watching a video. This technology has been applied to various content across our platform, including fashion show Fourtry this quarter. Cyber security continues to be very important for leading digital entertainment companies like us. We are committed to ensuring robust user data protection. Recently, our user information security management and privacy protection technology was recognized by leading international authorities with a grant of verification certificate ISO 27001 and ISO 29151. With growing user demand for diverse entertainment formats, we plan to launch a YouTube mode app named Suike.

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Yu Gong: To date, the YouTube model has not grown to scale in China due to a mixture of complex factors. We believe that with the growing deployment of 5G and AI technology, the market potential for a similar app will grow significantly in the next 2 to 3 years. In order to capitalize on this opportunity, we have started to make initial efforts and investments into building this model to scale. To lead this new and important initiatives, we are pleased to have Mr. Hong Ge on board, who brings with him extensive experience in technology and management. Mr. Ge has held key positions at industry-leading companies such as Facebook and Airbnb. He received his master's degree in computer science from Yale University, and his bachelor degree in computer science and technology from Tsinghua University.

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Yu Gong: In conclusion, 2019 was a challenging yet fruitful year. We further strengthened our iQIYI content ecosystem while growing and diversifying our revenue stream. I'm proud of what we have achieved during the year, and I look forward to 2020, which marks the 11th year since our founding. As 2020 unfolds, we believe the industry will continue to trend towards a healthier and more rationalized competition landscape. With increasingly newer and richer formats of video content emerging in the market, we now have more than 14 in-house studios that are dedicated to content production of drama, variety show, animation, children's content, and many more, allowing us to provide more exclusive and original content for iQIYI user going forward.

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Yu Gong: A rising willingness of Chinese users to pay more for premium content creates significant potential for our business. Following our initial steps in overseas expansion last year, we are planning to add more local content and international content this year. Overall, we are more confident than ever in our future growth prospects. Before I conclude my prepared remarks, I'd like to quickly comment on the recent outbreak of the coronavirus. During the outbreak, we prioritized the health of our employees by taking care of their needs and offering flexibility to work from home. So far, there's zero infection among all of our employees around the country. In addition, we have always been committed to maintain high standards of corporate social responsibility.

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Yu Gong: We produced various relevant video content that helped increase public awareness and support as the nation fight the outbreak. We are also the very first online entertainment company that invited over 200 celebrities to shoot 4 music videos for the charity song, Let the World be Filled with Love, which were released on our platform, various TV stations, and many other media platforms. We believe we will eventually overcome the coronavirus and get back to our path towards future growth with time, which remains intact. With that, I will turn the call over to Xiaodong to go through the financials.

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Xiaodong Wang: Good morning, everyone. Let me go through our financial highlights. For Q1 2019, iQIYI total revenue was CNY 7.5 billion, up 7% year over year. Total revenue in 2019 were CNY 29 billion, up 16% year over year. Membership service revenue for Q1 was CNY 3.9 billion, up 21% year over year. Membership service revenue in 2019 was CNY 14.4 billion, up 36% year over year. The increases were primarily driven by the growth in the number of subscribing members. Online advertising service revenue for Q1 was CNY 1.9 billion, down 15% year over year, primarily due to the challenging economic environment in China.

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Xiaodong Wang: Online advertising service revenue in 2019 was RMB 8.3 billion, down 11% year over year, primarily due to the macro headwinds, the uncertainty of certain content scheduling, and the intensified competition in the advertising business. Content distribution revenue for Q1 was RMB 878 million, up 18% year over year, driven by the high volume and the contractual price of the titles we distributed in the quarter. Content distribution revenue in 2019 was RMB 2.5 billion, up 18% year over year, driven by a number of premium content titles that were distributed during the year.

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Xiaodong Wang: Other revenue for Q1 were RMB 874.4 million, down 21% year over year, primarily due to the soft performance of certain business lines, partially offset by strong growth in the gaming business. Ad revenue in 2019 were RMB 3.7 billion, up 30% from 2018, driven by the growth of number of business verticals, especially the robust growth of our game business after the acquisition of Skymoons. Moving on to the cost of revenues. Our cost of revenue for Q1 were RMB 7.9 billion, down 10% year over year, primarily due to the low content cost, partially offset by the increase of other cost items. Content costs for Q1 were RMB 5.7 billion, down 13% year over year.

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$5.7 billion, 50% of year over year before.

Xiaodong Wang: This was a combined result of certain major titles being launched late in the quarter, as well as less expenses recorded relating to the original content. Cost of revenues in 2019 was RMB 30.3 billion, up 12% over 2018, primarily driven by the content, high content cost, and other cost items. Content costs in 2019 were RMB 22.2 billion, up 6% year over year due to our continuing investment in our comprehensive and diversified content library. Turning to operating expenses. SG&A expenses in Q1 were RMB 1.4 billion, up 15% year over year. SG&A expenses in 2019 were RMB 5.2 billion, up 26% from 2018.

Combined the result of certain Miguel Pardos being launched later during the quarter or the well that's expenses recorded related to the or content portal revenue inputs on lighting was RMB.

So the poised to rebid and up 4%.

From an aging firmly driven by the phone types like program called on other calls.

Well as on coffee lodging were RMB attended 2.2 billion up 6%.

Due to our continued investments in yellow from professing when some of it's quite a content library.

Operating expenses.

<unk> expenses in the fourth quarter will be at one point opening up 50% year over year, that's generally expect it to phone lighting wall art.

5.4 billion up for the 6% from yes, we saw the 18, if more permanent due to the increase there.

Xiaodong Wang: These were primarily due to the increased sales of the marketing expenses related to certain iQIYI apps and our game business. The full year expenses was also due to the high share base and the personnel related compensation expenses. Our R&D expenses in Q1 were RMB 711.3 million, up 17% year over year. Research and development expenses in 2019 were RMB 2.7 billion, up 34% from 2018. The increase was primarily due to our continued investment in R&D sites. Operating loss in Q1 was RMB 2.5 billion, compared with operating loss of RMB 3.3 billion in the same period of 2018.

Mike expensive it into the full setting a cheap apps and the outlook continues the full year extended.

I was also due to the hydro phase and the putting that relate to the competition expensive.

R&D expenses in the fourth quarter wall Onvia seven.

Several hundred maybe 11 quite so we've been ups severance expenses year over year research and development expenses that you put on lighting, well RMB 2.77, Bucks so difficult to fend for year 2018, Ukraine or probably due to our continued investment in R&D Bose operating loss fourth quarter.

For the RMB 2.5 billion.

I would also be load of RMB 3.3 billion superior.

Xiaodong Wang: The operating loss margin for Q1 was 34% compared to that of 47% in the same period of 2018. Operating loss in 2019 was RMB 5.3 billion compared to operating loss of RMB 8.3 billion in 2018. Operating loss margin in 2019 was 32% compared to that of 33% in 2018. The other income in Q1 was RMB 75.3 million, compared with the total other expenses of RMB 34.8 million during the same period of 2018.

Well pretty low margin.

The fourth quarter, though so the focus as a competitor there at all for the 7% secured over yet.

Operating loss equals a large single arm b.

Hi play through feeling compared to a property loss of RMB Eightpointthree Buda in 2018 over the long marketing puts on lighting was 52% in a competitive battle.

Rick started in 2018.

What are the probably the fourth quarter were RMB seven fourth 75.3 million compared with a put all the expenses of RMB 34.8 million hearing the same period.

Xiaodong Wang: The year-over-year variance was a combined result of foreign exchange gain due to the exchange rate fluctuation between RMB and the US dollar, increased interest expenses associated with our financing activities, as well as the impairment losses for certain capital investments. Total other expenses in 2019 were CNY 967.1 million, compared to a total other expense of CNY 676.2 million during 2018. The full year variance was due to the increased interest expenses, foreign exchange fluctuation, as well as the impairment loss and the lower fair value gain for private company investment. Loss before income tax for Q1 was CNY 2.5 billion, compared with a loss of CNY 3.4 billion during the same period of 2018.

Oh, yes aging the year over year varies from part is also a four week syndicating due to the cigarette fluctuation between RMB in the U.S. dollar equates interest expenses associated with our financing activities are the wheel.

Permanent losses for seven careful you estimate total other expense in mutual fund lighting will RMB lifetime to succeed.

7.1 billion compared to what are the expense of 676.2 billion ideally.

On the aging the full year variance was due to the inquiry.

Interest expense it fully extended fluctuation or the where are the impairment losses lower if it were looking for private company regimen.

Lost between from tax for the fourth quarter was RMB 2.5 billion compared with a lot of RBC appropriately carry the same period of 2018 loss before income tax mutual fund lighting was RMB 10.

Xiaodong Wang: Loss before income tax in 2019 was CNY 10.2 billion compared to a loss of CNY 9 billion in 2018. Income tax expenses for Q1 was CNY 22.6 million, compared to income tax expenses of CNY 79.5 million during the same period in 2018. Income tax expenses in 2019 was CNY 61.9 million compared to income tax expense of CNY 78.8 million in 2018. Net loss attributed to iQIYI for Q1 was CNY 2.5 billion, compared with a loss of CNY 3.5 billion during the same period of 2018.

Fulfilling compared to a lot of RMB life in 2018.

Income tax expenses for the first quarter was RMB 22.6 million compared to what you from Texas.

Some of the Lifepoint five building.

Giving some carrier the fulfillment anything.

Income tax expense lighting was RV.

The 1.9 million compared to income tax expense of RMB seven April aiming to influence on the 18 net loss attributable Archie for the fourth quarter was RMB 2.5 billion compared with a lot of only 2.5 EBITDA during the same period 2018.

Xiaodong Wang: Diluted net loss attributed to iQIYI for ADS for Q1 was RMB 3.43, compared to a diluted net loss attributed to iQIYI for ADS of RMB 4.83 in the same period of 2018. Net loss attributable to iQIYI in 2019 was RMB 7.3 billion, compared to a net loss of RMB 9.1 billion in 2018. Diluted net loss attributable to iQIYI for ADS was RMB 14.14 for 2019 compared to a diluted net loss attributable to iQIYI for ADS of RMB 17.01 in 2018. As of 31 December 2019, the company had cash equivalents, restricted cash, and short-term investments of RMB 11.5 billion.

Lukas net loss attributable are cheaper ideas for the fourth quarter.

I don't see a 3.43 compared to our diluted net loss attributable to achieve ideas of RMB.

4.83 superior aging net loss attributable to achieving 2019 was RMB 1.3 billion.

Compared to a net loss of RMB 9.1, feeling we flip on anything if I look at net loss attributable to our chief ideas.

It would be 40.1 full well put on lighting compares with net loss attributable to our ideas of RMB 70.1 inputs on the 18.

If somebody said it for two.

Well certainly to the company had a cash cash equivalents picked character in the short term you resolute of RMB 11.5 billion.

Xiaodong Wang: Turning to our Q1 2020 guidance, we expect total revenue to be between RMB 7.10 billion and RMB 7.52 billion, representing an increase of 2% to 8% year-over-year. This forecast reflects iQIYI's current preliminary view, subject to change. This concludes our prepared remarks. I will now turn the call to the operator to open the Q&A.

Total foot corridor.

We expect total revenue to be country, RMB 7.10 billion.

Maybe if employee fight to appealing that sending a free increase of 2% 8% year over year. This phone call. It the reflective I do part of the preliminary view 50 trends. This conclude our prepared remarks, I will not within a full to the operator open to feel Nate.

Thank you seldom.

Operator 2: Thank you, Xiaodong. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key. Please state your question in Chinese first, then in English to give opportunity to others. Please limit to one question each time. Your first question comes from Alicia Yap from Citigroup. Please ask your question.

Operator: Thank you, Xiaodong. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel the request, please press the pound or hash key. Please state your question in Chinese first, then in English to give opportunity to others. Please limit to one question each time. Your first question comes from Alicia Yap from Citigroup. Please ask your question.

Ladies and gentlemen, the then I'll begin the question and answer session. You fish asked the question. Please press star one kind of photo and video name to be announced fish to cancel their request. Please press the pound she.

Please state your question in Chinese first then in English.

<unk> <unk> I noticed just limit to one question each time.

Your first question comes from.

Alicia Yep from Citigroup. Please ask your question.

Alicia Yap: Hi, thank you. 管理层早上好, 谢谢接受我的提问, 祝大家身体健康. 我有一个, 就是关于竞争的这方面, 就是龚总, 刚刚也说到, 其实竞争环境是比较 rational 了, 但是我们也看到像春节的时候, 就是有一个竞争对手就比较, 就是 surprise 地去, leverage 了这个, 就是电影院的, 就是 closure, 然后去 license 了一些 movie, 所以就想, 就龚总说一下, 就是说整个竞争格局的这个变化, 就是说你们会觉得说这个是一个, 比较 threaten 的一个, 就是变化吗？从一个格局来讲, 就是之后, 然后从一个 licensing pricing 方面, 会不会想, 就是提升了, 就是 professional license 这一块. 然后另外很快就问说, 就是现在这个, 情况呢, 就是说我们今年还有没有, 意思说是可以提价的, 就是在这个 member subscription 这一边. 我自己翻译一下. So, understood that you mention earlier in the prepared remarks, the competition seems more rational, but just wondering with one competitor surprisingly leverage the closure of the movie theater to get the license of a new movie broadcast during the Chinese New Year, so how do you see the competitive landscape to evolve? Do you think that will have a disruption to the pricing for any licensing content in the coming future? In light of these virus impact and the macro outlook, do you think you still have plans to increase the leasing price for the member subscription? Thank you.

Hi, I'm. Thank you Glen can push on how she's making sure that he like to that as.

Well you got to sequentially.

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Beat out threats and even though.

Sure sure Yeah, I told you guys got you identified so hot rolled tones that licensing pricing takes time yet.

Let me show two ships, so I'm not sure should position the license.

Oh, Hi, George what you should see that target.

I will not usual how your mail you finish wash through.

Yeah that usually that's sufficient forget.

What do you find.

So I understood that you mentioned earlier in the prepared remark the competition.

More rational.

Just wondering with one compatible surprisingly lab, which does close it off the movie theater to get their life and stuff and you won't be broadcaster into California. So how do you see the competitive landscape to fall off.

Do you think that well how far that disruption to the pricing for any licensing content in the coming field trip and making like all Steve virus impact and the macro outlook do you think you're still have tries to increase the leasing price for that but that's for sure.

Oh sure Jeff.

Yu Gong: 好，这个市场格局，从用户端的流量份额到广告收入到会员收入，目前爱奇艺、腾讯视频、优酷占市场份额大概80%几到90%几，所以这个格局已经是稳定的，而且是没有发现有任何的迹象可以大幅度地有变化的。所以在这个大的格局下，目前我们认为未来看不出有大变化的迹象，这是第一点。第二点，在春节期间，头条买了一部电影，未来可能买多部电影，这个电影是头部的院线电影。那么通过免费的模式给用户播放，依靠广告收入，我们认为这不是一个可持续的健康的商业模式。很明显，电影的每分钟成本要比剧、综艺节目大数倍甚至是数十倍。依靠广告的商业模式是不可能持续长久的。当然出于拉新用户等营销的目的，这么做是可以的。所以对于我们现在长视频的这个行业，不会产生模式上的变化跟有持续性的这种影响。谢谢。

Yes.

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Dahlia Wei: I will first comment on the competition landscape. I think, in terms of user traffic or advertising or membership, in terms of the three metrics, our Douyin and Tencent Video and Youku altogether combined, we already take up 80%+ to 90%+ of the overall market share. This landscape has been very stable and we didn't see any sign of major change to this landscape. I think, that's my comment on that. Secondly, on your question of a movie that licensed, by that then, yes, the license a top quality movie during the Chinese New Year. In our view, the free model, putting a very top movie free to watch on your platform and trying to make it back by purely advertising, I think that's not a very healthy or sustainable model going forward. Because the cost per minute for movie content is much more expensive, it could be several times or a few dozen times higher than the cost per minute of for drama series or any other content. That's not a normal model. In term if you want to use that movie to as a user acquisition approach or for marketing purpose, that's okay, but it will not cause major model change for industry. Thank you.

Yes.

I think in terms of user traffic or advertising or membership in terms of the three magic Oh.

Right.

You too.

Cool.

We've already taken out.

90% of the overall market share.

Thanks again.

Every single week.

No major change to that basket, so I think that.

And secondly on the question.

A movie that license job.

Yes.

Hello.

New York.

But.

The three model I put it.

Very top movie ready to watch.

And the trying to make it back.

Purely advertising I think.

Healthy.

Well model.

Forward.

Because the cost for meeting.

The content is much more expensive it could be several times or have you done at higher than cost for me.

Yes.

Other content. So that's not a novel model, but interim if you want to use our movie to as a user acquisition approach or for marketing purposes that okay.

It will not cause major novel changeable industry.

Your next question comes from <unk> from Bank of America Merrill Lynch. Please ask your question.

Operator 2: Your next question comes from Eddie Leung from Bank of America Merrill Lynch. Please ask your question.

Operator: Your next question comes from Eddie Leung from Bank of America Merrill Lynch. Please ask your question.

Eddie Leung: 大家好，希望大家都平安。刚才我听，龚宇也讲过，我们在短视频方面，也是可能会投入比较多。好奇一下，就是，我记得之前我们已经有几个APP，我印象中好像都三四个，最近我们也知道再推出一两个，所以想问从一个策略方面，其实我们是打算还是用几个APP，然后每个APP可能针对不一样的人群，还是我们这期是想做一个所谓超级APP，就是一个比较大的APP出来了。这可以跟我们讲一讲这个investment跟一个策略方面。My question is about short video or mini video APP. I remember in the past we already have a couple of short video APPs from iQIYI.

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A couple offline.

Shelby deal Atps from.

Eddie Leung: Just wondering going forward, what's the strategy? Are we going to maintain a multi-app strategy or are we going to develop a super app? Where and how much are we going to invest? Thanks.

It should be so just wondering going forward or like what's the strategy are we going to maintain a lot with high app scratchy a lot of equal each true pick that up Hey OS.

And well and how much we have to launch really fast opex.

Yu Gong: 好了，现在中国市场有两类的视频的APP，一类就是像爱奇艺这样的长视频，你可以认为类似于美国的Netflix。然后另外一类是小视频，我们管它叫小视频，也就是播放视频的主要长度在一分钟以内，几十秒钟的，比如说抖音这样的视频。这两种的形态市场份额都很大了，每天的DAU全行业都在两三个亿以上，但是播放时长平均在七八分钟到十几分钟的这种中等的视频，也就是YouTube这种模式，在中国市场上现在的份额很低，我们了解的数据可能也就在全行业，也就在一亿DAU左右，可能还不到。但是YouTube在世界大部分的国家和地区总时长是排第一的，所以我们认为这个在中国未来的市场会有机会。随刻是我们新正在研发、正在测试的一款新的产品，目前上线了一些测试的，这个产品现在数据还不错，随刻这个产品主要对标的是YouTube这种模式。

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Ladies and gentlemen, you make more than that.

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Do you still feel.

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Dahlia Wei: There are currently two forms of video apps in China. One is a long-form video platform like ourselves. This is a benchmark to the Netflix model in the US. The other one is we call it mini video, which mainly consists of the very short, which is shorter than 60-second-long video content such as Douyin and some other apps. Of those apps already reached a DAU of 200 to 300 million for the entire industry. But if you take a look at the mid-length-form video, which is, you know, 7 to 8 minutes or 10 minutes longer, which is more similar to the YouTube model. This kind of app is quite small in China. I would think there's only less than 100 million of DAU currently.

Yeah I'm confident.

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200 300 million.

Industry.

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I would.

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Dahlia Wei: In fact, you know, the YouTube model by far is the biggest, is the number one in terms of time spent around the globe. I think there is a lot of opportunity over there and we are developing a new app called 随刻. It's currently under some product testing and we have seen some encouraging data points so far and we will try to build that app. Thank you.

Hi.

I'd like.

You want your model.

The biggest is a number one it.

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Okay.

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Eddie Leung: 很清楚。谢谢。Thank you。

Your next question comes from Thomas Chong from Jefferies. Please ask your question.

Operator 2: Your next question comes from Thomas Chong from Jefferies. Please ask your question.

Operator: Your next question comes from Thomas Chong from Jefferies. Please ask your question.

Thomas Chong: Hi. Thanks management for taking my questions. I have a question about the membership business. Can management comments about how we should think about the net add in 2020 as well as the ARPU trend. 谢谢管理层接受我的提问。我的问题是付费会员这个方面，想问一下，就是我们今年啊全年的，付费用户数的增长的预期，跟19年来比呢大概是怎么样？然后从ARPU方面的话呢，可不可以谈一下，就是这个超前点播的影响到底会有多大？然后啊，最后啊，也祝大家身体健康。谢谢。

Hi.

Thank you Ben picking my crashes.

No question about the membership.

Okay management comments about Oh, we should think about the net add in trendy trend hey, that's well at the optimal trend.

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Yu Gong: 因为这个冠状病毒的影响，现在有一个多月了，几乎全国的用户都在家，视频的流量暴涨。当然对于爱奇艺来讲，付费用户数也是远远超过预期的。但是随着复工的开始，流量也好，会员的新增也好，在减弱，在变慢。所以这是一个特别特殊的情况，目前的这个现实比原来预期好很多，但是并不意味着今年的二季度、三季度、四季度就一定比原来预期好很多。当然我们也会采取更多的措施，包括增加内容投入，包括提高产品的用户体验、支付方式的便捷等等，留住这些会员，让他们更多时间成为爱奇艺的付费会员，这点是非常重要的。这跟以前的计划发生了特别大的变化。从去年四季度到今年一季度，我们试验了几部剧，包括庆余年、爱情公寓五等等剧，在做超前点映。主要的方式是让已经成为会员的用户付更多的钱以后，可以比普通的会员看更多的剧，更快地看更多集的剧。那现在看样子这个模式是非常成功的，但是因为这种剧相对而言比较少，所以占总收入的比例还不高。我们未来会形成常态，变成一种经常的播出方式来把这个规模做大。所以在四季度跟一季度对ARPU值的影响还不是很大，但是相信以后是重要的提高ARPU值的方式。另外一个提高ARPU值的方式是减少促销。因为我们的list price原来大家都知道是¥19.8，然后在苹果手机上是¥25，原来促销导致ARPU值是十几块钱人民币。我们今年会大量地减少促销活动，当然也有其他的手段，等这次疫情过去以后，会采取一些其他的手段，比如说推出更贵的套餐，和在适当的时候提高标准的会员的价格。谢谢。

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Dahlia Wei: I would like to comment on some of the impact of the coronavirus outbreak since the outbreak has been over a month now. Because a lot of people stay at home, and we have observed some big traffic spikes as well as some, you know, beneficial effect on our membership net addition. However, with you know, a lot of companies and a lot of people gradually getting back to work, we think there will be some slowdown in the trend and even some setback in the future. That trend is just temporary and how that will trend over to Q2, Q3, and Q4, that view needs to be observed. So far we cannot give you a guidance for the full year net addition. We will continue to invest in our content offerings and improve our user experiences as well as offering more and more convenient paying method for people, for users to grow our membership business. Another point to your question is we do launch a new service called advanced viewing in Q4. We have applied that model to several content, including 庆余年 and iPartment 5, and something of that service, which enable users who are already our members to pay some extra fees to get more advanced and quicker access to the episodes. Which those now I think so far has been see good results. We will make this model into a routine practice in our membership services going forward. Because this kind of advanced viewing content only account for small percentage of total content offerings, the revenue contribution is not material in Q4. Also the ARPU contribution is not that significant in the Q1, I would say. In the future, we in addition to this advanced viewing fees, we will have some other initiatives, including narrow down the discounts. You know, our list price is CNY 19.8 for Android users and CNY 25 per month for Apple users. Because of some discount and the promotions, our effective ARPU is only around ten and above, we will narrow that discount. Also after the coronavirus, we will look into some other initiatives, including offering some higher priced packages or looking into some potential increase of list price, but that will be after the coronavirus. Thank you.

Okay.

I would like to comment.

Hi.

Okay.

We're now and that because a lot people.

And we have no.

Hi, Thanks.

And well.

In fact.

Membership.

Well I work with.

I want to companies people gradually.

You work.

I think there will be.

No.

A few chart so that time, just temporary hadassah time.

Over to Q2 Q3 I'm.

Not do is on you tube.

So.

So far we cannot.

I've guided for the full year not.

We will continue to.

Improve.

Right.

More and more convenient pay matter.

People use or to grow membership business.

And another question I feel confident as we do a.

I wish I knew that caught up.

In the fourth quarter, we have applied.

Several contact easily.

I don't.

Something Oh.

Which illegal you'll those who already all members to pay some actual.

More.

Quicker access to.

Now, which I think.

Good.

And we will make the.

Model each white.

He bracket.

Going forward, but because these kind of.

Secondly, a cohort.

So the revenue contribution.

Not materially for dot upward.

Contribution is not significant.

The coupons you want.

In the future we.

Visions.

We believe.

We will either initiative, including natural downbeat Uh huh.

Hi, it's 91 for.

Are you there.

From an.

Apple users.

Just.

Our effective.

R&D time slot.

We will.

Yes.

After the accrual not we were looking to.

Okay.

A higher price packages or.

Looking to.

Potential.

Now we will.

After the accrual.

Thank you.

Hey.

Yu Gong: 谢谢。

Your next question comes from landed Chen from Goldman Sachs. Please ask your question.

Operator 2: Your next question comes from Wendy Chen from Goldman Sachs. Please ask your question.

Operator: Your next question comes from Wendy Chen from Goldman Sachs. Please ask your question.

Wendy Chen: 你好，龚总、小龚总、Dahlia，谢谢接受我的提问，也祝大家身体健康，百毒不侵。我的问题是关于内容成本的，就是我们看到2019年的时候，咱们的这个内容成本占总收入得到了比较好的，有了一部分的下降。那么我想请问，就是我们现在看到明年2022年，之前提到的一些限薪令之后的那个可能更便宜，就是单价下降之后的这个licensed content会不会帮助我们的内容成本进一步下降，以及我们预期在一个长期来看，内容成本，我们理想的状态是能够达到收入的什么水平？我自己翻译一下。Thanks, management, for taking my question, and wish everybody good health and safety. My question is about content cost, and we see that in the past year content cost as a percentage of revenue has been well controlled, with good improvement. And I was wondering for outlook into 2020, are we seeing the decreased price on licensed content will help to further control the content cost?

Oh go ahead.

This is this all it right you guys think it's in combat converting or whether one piece of glass.

I just show up on Kinda I mean, you're going to show all the time that get taken they won't come back a sad coupled with the about God you.

Well thanks.

I'm always constantly under short they said that kinda Donnie I mean, I tend to not easy access wanting to hold that Nick could okay. I just shared sent back I'm sure they take a license content.

Okay, and then what kind of the precise.

He said the copper that come out with that I want to do you kind of got I'd like I'd household.

Oh, I think you're right.

Thanks for taking my question, Mike and I wish everybody could houses safety. So my question is about a content costs and we see that in the past year kind of course as a percentage of revenue has been well controlled.

A quick Wisconsin.

And I was wondering for cooking to 2020, I, we seem to be off.

Decreased the price out licensed content will help to father, <unk> father control with the cotton costs and the what is our IPO kind of course as a percent radical classic rock back.

Wendy Chen: What is our ideal content cost as a percentage of revenue cost in the long run? Thanks.

Xiaodong Wang: I think on the general trend of content cost will continue to be optimizing the next few years, you will continue to see that the percentage revenue and the content cost will continue to decrease in the next few years. I don't see any next drivers now that the content cost will go another directions, no matter the price of license copyright, the quality, and the monetization ability of our original content. The answer is yes, definitely we will see a positive trend of content cost structure in the next few years. Thank you.

<unk> money when you.

HM.

The German turned off the condom cost will continue to view.

Optimizing the next few years he will continue to some degree revenue.

In the comes on call. So we'll continue to do Crazy with next few years.

I don't see any Nick dry, but now that the comes on postal what go another directionless no matter the price off like as copper prices. According to the monetization potential for all of your new content. So the answer is yes definitely with two patent it would try to the of content cost structure argument next few years. Thank you.

Okay.

Thank you.

Operator 2: Thank you. Your next question comes from Ella Ji from China Renaissance. Please ask your question.

Operator: Thank you. Your next question comes from Ella Ji from China Renaissance. Please ask your question.

Your next question comes from a lot G from China Renaissance. Please ask your question.

Ella Ji: 早上好，管理层，也祝大家以及亲朋好友都身体健康。我第一个问题是关于咱们一季度到目前为止新加的会员，可不可以跟我们分享一下有多少是完全新增的用户，有多少是回头客，就是以前用过你们，但是中间停了，现在又回来的，以及有没有看到这次的疫情能不能有机会帮助我们拓展到以前没有接触到的新线市场。然后第二个问题是，龚宇总提到的这个中视频就即刻模式，想再请问一下，您对这一种模式的内容形式和成本是怎么去考虑的？因为如果是用PGC的话，可能获取成本会比较高，然后用UGC呢，可能就是要做七八分钟的门槛又比较高。所以在目前中国的这样一个市场的情况下，您是如何去判断把握这个中视频的内容形态的。最后很快再请教一下小钟总，就是还是关于content cost，因为我们看到过去几个季度会有一些volatility，就有些季度会高一些，有些季度又下来一些，所以今后这个咱们应该如何去理解这个季度、季度之间的波动性。 My first question is regarding the newly added subs during Q1. I'm just wondering how many are brand new users to you, and how many are old users who have subscribed and stopped and now come back to you. And do you see this as an opportunity to expand to the lower tier cities that you didn't have a chance to touch in previously. My second question is about the new mid-length video app 即刻. I'm wondering what would be the content format — is it more PGC oriented or is it more UGC oriented? And the last question is about content cost. I just wonder if you can help us understand the quarterly volatility in the content cost at a dollar amount level. Thank you very much.

Oh, sorry, when he came into effect that teachers on high alert ships, you can't home what they come into play as.

With that wasn't I didn't see data.

Okay. Go ahead. Please go ahead of shale Washington season.

Well go how should we hope.

When you when that you're doing it now.

He'll know kind of relative Oh, I'd say, it's just that did each and then it seems like ongoing corn cotton valley nail it without that he said.

I got a they're going to share Oh. He thought she did I talk strategic Oh, My gosh, it sounds that Lisa I mean, we basically if you take a more she doesn't need also we ship quick hadn't bancshares chip.

Oh shit.

No kidding.

I want you can know Daqo Oh, you would you see now coming so she also took off and goes up a month.

Oh, I see it sounds more tend toward that down there.

Yeah.

Sure just what she I'm done well I guess two ships that NIM.

I think I know that you guys. So go just yet.

Content across you know kind of what you see that you don't see volatility. So you did you know what does it.

Yes, I mean, I could think won't take I don't know, what's your take or two kids will tend to go portal.

So.

My question is my first question, but adding that newly added.

During Q.

I'm just wondering how many branding you use it to you and how many oh, the who doesn't have subscribed and stops it and then I'll come back to you end up do you see opportunity. This is an opportunity to expand it to the lowest yes. It is I back you didn't have a chance to touch indeed.

Okay. That's it.

My second question is about.

The you HM knit, yes, neither attitude cool.

Hi, I'm wondering what would it be it up how kind of format I did not P.J.C. oriented or is it you just see oriented and my last question is about a content cost.

One day, if you can help us understand that the quarterly volatility.

Our content costs is that dollar amount.

Thank you very much.

Xiaodong Wang: Ella, I will comment on your first and third question and then let to comment on your second one. First, about the membership business in the Q1, because I think this is Q4's financial release, so I will just briefly comment on the recent update. Definitely you are right, most of the new subscribers we acquired in the Q1 are still not a hundred percent new subscribers, because the majority of those new subscribers had been our membership business users in the past few years. As I comment before, in the past two to three years, we accumulated over 300, near 300 million paying subscribers. So the base is quite big.

So.

So I won't comment all your footprint. So the question and then that's going to comment on your second to once first above the membership in answering the first quarter because I six in Q4.

I'm not sure. It is so I was just through for the called on to other risks in the upside.

No yard rights and most the off the new subscriber oil acquired during the fourth quarter austere north of 100%, a new software, but because the majority of those news for quite a bit.

<unk>.

Mm Hmm membership business users in the past few years I comment before in a plus the pool for three years were committed over 300, the need to 300 million paying subscribers.

So the faith in quite a big for both off of them are there come from the pay deal that was before but it's definitely the resultant new content and though they can probably Redmond will help us to penetrate.

Xiaodong Wang: Most of them are still come from the paid users once before. But definitely the recent new content and the entire environment will help us to penetrate to those areas which are less active in the before, including lower tier cities. That's sure, definitely it will help. For the third question about the volatility of content cost between quarters. Yes, you will see that volatility in the next few years, because as I comment before, it's not only because of the seasonality, but also it has something to do with like the production schedules, the pipeline, the approval process. A lot of factors behind. I also comment once before, it's very important to understand actually the content investment does not necessarily have something to do with the revenue in that quarter. It will have lag effect. For example, most of the effects of content costs on the membership business will be reflected in the quarter after or even two or three quarters later. Basically it's not a short term business. That's why I encourage you guys to look at a longer period than individual quarters. That's my thoughts. I will let to comment on the second one.

Those areas, which are less activity that before including low tier cities, that's true definitely the warehouse.

Oh by the third questions about who the volatility of content cost of the team and portraits, yes, you will see that volatility during the next few years because a lot combined before it's not only to caught off that seasonality, but also it has something to do ways. The like see the production scrap.

George the pipe.

The approval process for love effect of beside the also comment was before it's very important to understand is actually is a compelling investment.

Necessary has something to do we use those revenue during the quarter.

That you fed for example, most of that the effects of content costs on the membership thing is would be reflect that you can afford to africa or even two or three called the later so basically it's not a should have been to select why are you hydro you guys to look at her London pure then I interpreted quarters.

I mean, that's my thoughts on that you're going to comment on your southern England.

Yu Gong: 好，随刻它主要内容有两大类，第一大类是PUGC的内容，它的来源是MCN，或者是个人，或者是一些专业的一些机构。那上传的内容我们用广告费分账的，或者相对不收费分账的方式付给他们内容成本，所以不会这个固定地增加爱奇艺的内容成本。然后第二大类内容就是现在爱奇艺的这个长视频内容也会在随刻播放的，这样会摊销掉一部分的爱奇艺的内容成本，或者是换一个角度，也可以说通过随刻来分发爱奇艺的影视长视频内容，获得更多的这个货币化能力。大概就这些内容吧。我再补充一下，就是YouTube在十几年前美国开始这个发展起来，全世界的大部分国家和地区，现在YouTube市场第一，有非常多的复杂原因导致在中国这个形态没有起来，其中跟文化原因，还有技术的应用水平都有关。但是现在情况不一样了，为什么我们认为应该增加投入？最主要是因为5G的普及，因为在这个3G时代，然后让这个图片，就是图片类的这个应用，比如说微博变成轻应用，用户花钱少了，而且心里感觉负担轻了，他觉得看一张图片不会花很多钱，也不会花很多时间。3、4G普及的时候，小视频就几十秒的视频，像抖音这样的视频普及开了。我们认为5G的时候，这种中等视频，几分钟的这种视频会普及开。再加上AI，就是人工智能技术应用会加速这种中等的视频变成轻应用的这种速度。所以我们现在觉得应该去加大投入，当然也不是今年或者明年就一蹴而就，可能需要两三年的时间去培育市场。谢谢。

Okay.

Cool.

Now that he's already.

You know legal other lines I'm sure you know what are true.

Yes.

Google sometime in April.

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But.

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To the seventies.

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For the.

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Hi, Thank Josh.

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Sure.

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And that's really nice she's done out who.

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Sure. So you should just yet.

Dahlia Wei: OK, for Suike. We have basically two types of content. One we call it PUGC with a professional user generated content becomes either from MCN or individuals or some professional institutions who upload their content and then we list some revenue share either you advertising or paid view for them, so that will not increase our fixed content cost. On the other hand, we also offer some long form video content from our main app, so basically Suike will become additional distribution channel for our content and also improve our monetization, and meanwhile help to dilute our content, overall content cost. I also want to comment on, you know, because YouTube since 10 years ago, YouTube has developed very fast and become the big, the number one highest tech standard all over the world. But in China, that haven't really take off in China because some cultural background reasons and also technology reasons. Why we are starting to look at this model is because things are changed now. We have seen approaching 5G technology, because if you look back when the 3G comes, it makes the Weibo with the picture rich app become a light app. Then in the 3 to 4G era, you know, those mini video become a light app in users' view. Now the 5G is coming and we believe the several minutes long video app will become a light app for the audiences. Also apart from 5G, the AI is also developing very quickly and that will help the trend that enable people to use the video app as a very light application. Thank you. Oh sorry, I want to add the last one is Dr.

Oh for sleep.

We have.

Basically two types of comment why do we call it to you.

Because I know from.

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So that will increase.

I'll comment on.

On the out of hand, we also for long.

From.

So basically what we will be caught.

China or content and also improve.

And we will help to dilute.

Our content overall.

And I also want to comment.

Because you too.

Hi.

Right.

The big number while.

All over the war.

Kind of that happens really.

Take <unk>.

In China, because cultural background.

Correct.

But why we.

On to kind of this model it because.

Things have changed now.

I have seen.

Uh huh.

Gee I technology.

Because if you look how I look back when the Threeg It makes a week.

We should pick tour, which has become a nice and then in the Threeg to Fourg.

Uh huh.

Yeah.

Right.

Users.

And now the Fiveg coming and we believe that.

Small you absolutely.

A lot.

For.

Yes.

Also a popped on TV.

Quickly how the time.

People people to you.

You are very light.

Oh, sorry.

Dahlia Wei: Gong said the 随刻 incubation will take several years, will not, you know, be something mature this year or next year. That's all. Thank you.

The last month.

I would not be Threeq insulation, we will take several years.

No.

Sure.

Matthew.

Thank you.

We still got time for one last question. Our final question comes from 10 Ho from Th capital. Please ask your question.

Operator 2: We still got time for one last question. Our final question comes from Tian Hou from TH Capital. Please ask your question.

Operator: We still got time for one last question. Our final question comes from Tian Hou from TH Capital. Please ask your question.

Tian Hou: 龚总好，小董好，大家也好。我有一个问题，就是疫情期间呢，大家都在家休息了，那我相信这些内容制作的那些studio可能也都不上班了，而且还有报道说这些明星都跑到国外去躲疫情去了。那么在未来几个季度的内容的这个供给上，不知道龚总对这个有什么看法，还有爱奇艺在内容储备上是个什么样的状态？So during this outbreak the production of the content, most of them have been stopped. So what is the content supply in the next several quarters going to look like?

Hmm and go somehow maybe I'm not that Uh huh.

Make a wheel you'd have been T to ship eating TVN the bad all day Cashews, Sheila I was asking does it need to resolve it just so then you just studio coming at the <unk> Ben how you follow those continue to build though glad she each in Chile, and then the 10 million that age 32, the names of the tick a chunk of that.

He got Teekay Lngs Mccann <unk>, she's anything too they shop should or shouldn't assume it's something that okay that went to change. So during this outbreak the production of the content <unk>. Most of them has not happened stop so what is that content supply in the next several quarters.

It's going to look like Oh, so slight she what do you Oh status in in terms of accounts tend to even today. Thank you.

Tian Hou: For iQIYI, what is our status in terms of a content inventory? Thank you.

Yu Gong: 谢谢。分品类分析一下这个问题，对于我们现在

Sure Jeff when you get night, you chartered when do you envision that don't freestyle machines, obviously challenge.

Tian Hou: Mm-hmm.

Yu Gong: 流量最大、拉新能力最强的戏剧，就是那个电视剧、网剧来讲呢，因为他们的制作周期非常长，所以因为疫情影响两个月、三个月，从整体角度来讲影响不大。第二个原因，这个戏剧啊，就连续剧啊，历史上的储备也非常多，因为过去几年时间这个行业过热，储备了很多剧，现在还播不出来，因为这个后期制作慢，然后投资不足等等。所以对于戏剧来讲，如果疫情在未来的两三个月内结束，影响不大。对于综艺节目是短期影响，确实是导致一些电视综艺节目和我们自制综艺节目可能要晚两周啊、四周啊播出。对于院线电影来讲影响比较大，因为现在电影基本上都是大部分的头部电影都是按窗口期的，第一个窗口期在电影院播放，第二个窗口期在互联网播放。现在少数电影在这个电影院不播放了，直接在网上播放，比如说我们和腾讯合作一起播放的《肥龙过江》，《肥龙过江》也是后面点播的，本来是院线电影，效果也很不错。这是少部分，但是大部分的头部电影现在延期，而且还不知道什么时候可以上院线，因为只有他们上了院线以后，我们互联网才能上，是第二个窗口期，这个影响比较大。

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David Brown: Mm-hmm.

David Brown: 但是幸好现在电影在整个的流量和拉新里面不是最重要的，最重要的还是连续剧。谢谢。祝大家身体健康。

Nitrogen.

Ventral hernia yeah.

Lacking which are critical job, so not a harsh Richard Shannon.

Sure.

David Brown: 好，谢谢。

HM.

Dahlia Wei: There are several types of content for our drama, which contributed to both traffic as well as the net addition for us. I think because the production cycle for this drama content usually are very long. If the coronavirus caused a couple of months of delay, that will not be a big problem, because we also have a lot of reserves in our content inventory. For some variety show content, not only for us, but also for some TV shows, the overall impact will be 2 to 3 weeks. That will be a near-term impact of that. Also for movie content, for most of the theatrical movies, there are several window periods of viewing. The first will be the box office launch. Because of the virus, most of the theatrical movies have been delayed their window period. The second window will be on our platform.

Uh huh.

Hi.

Well for drama.

Hi.

Yes.

I think.

Because the production cycle for this summer.

So the crude I've noted.

A couple of Michael.

Not the problem.

How long reserve.

Inventory for.

Our initial content.

Not only.

<unk>.

The overall impact will be two three weeks.

Yeah.

Oh.

Also for.

Yes, absolutely.

Window period.

First of all of it.

No not because of.

Most of the.

Surgical movies.

Right.

Okay.

The second window.

Dahlia Wei: We have seen a few of those theatrical movies, for example, Enter the Fat Dragon. That's a movie that we and Tencent Video co-launched on our platform on the pay-per-view basis, which have been seeing very satisfactory results for us. Most of the other movies will still waiting for a delayed window for the box office launch. Luckily, the movie content is a very small part of our content offering, so it's not a big impact. Thank you for your question, and I wish all the participants and their families healthy and for everybody. Thank you.

We have seen a few of those.

And.

That's a movie that we.

Uh huh.

Oh, sorry, the pay per view <unk>.

Okay.

But most of the other.

<unk>.

Oh.

Luckily the movie.

Smart.

Okay.

And often.

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Thank you.

<unk>.

Healthy and.

I'd like to have the conference back to punishments chased catch it is.

Operator 2: I would now like to hand the conference back to management. Please continue.

Operator: I would now like to hand the conference back to management. Please continue.

Dahlia Wei: Okay. Thank you again. If you have any other questions, please feel free to contact us. Thank you.

Okay. Thank you again and if you have.

Thank you.

Yu Gong: Thank you. Bye bye.

No.

Hi.

Operator 2: Ladies and gentlemen, we have reached the end of our conference call. Thank you for participating. You may all disconnect.

Operator: Ladies and gentlemen, we have reached the end of our conference call. Thank you for participating. You may all disconnect.

Ladies and gentlemen, risky and if I were conference call. Thank you for participating you'll be all disconnect.

[music].

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