iQIYI Inc (IQ) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the iQIYI Fourth Quarter and Fiscal Year 2019 Earnings Conference Call.

(Operator Instructions) 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.

Thank you, operator.

Hello, everyone, and thank you all for joining iQIYI's fourth quarter and full year 2019 earnings conference Call.

The company's 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 our 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 the 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.

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. Gong.

Please go ahead.

Hello, everyone, and thank you for joining us for our fourth quarter and the full year 2019 earnings call.

We concluded the year 2019 with a solid ending.

Q4 and the full year net revenues 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 a 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 subscriber 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.

As of December 31, 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 RMB 14.4 billion and contributed half of our full year 2019 total revenues.

This reflects our dedication in delivering best quality content to our subscribers and our various operating initiatives to expand our subscriber base.

In the fourth quarter, the release of a number of highly popular drama series drove subscriber growth, namely Qing Yu Nian, the Listener, Sword Dynasty and Spirit Sword Mountain, among others.

Typically, drama series have been the main driver of the subscriber growth, but with our portfolio of content expanding, we are beginning to see a wider range of content categories playing an increasingly important role.

For example, hit theatrical movies such as Ne Zha and The Captain, animation series One Piece, as well as the 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 legacy 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 reinforces 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.

During the fourth quarter, we introduced a value-added membership service for some of our content, including Spirit Sword Mountain and Qing Yu Nian, whereby subscribers can enjoy advanced access to additional episodes at a premium level of packaged or unit expenses.

This was the first time we offer 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 privilege, hence, improve overall ARPU and monetization.

We continued our efforts to penetrate into lower-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.

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 retail chain stores, among others.

Leveraging their strong local presence in hundreds of lower-tier cities, we were 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 competition environment.

Nevertheless, we tried to mitigate the impact of these headwinds by adapting and upgrading our advertising products, better leveraging the strength of our content and expanding our advertiser base.

For brand advertising, by converging our content strengths and advertising creativeness we have launched numerous new formats of embedded ads, innovative ads, sponsorship ads and so on, to better cater to advertisers' needs.

For example, in the fourth quarter, our original fashion-themed reality show FOURTRY attracted over 10 leading brands, including Vivo, Lancôme, Pepsi and the e-commerce platform Aomygod.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 fourth quarter, although from a relatively small base.

Leveraging our massive user traffic, abundant data and AI algorithms, true-view ads and in-feed ads continued to serve as dual engines for growth.

In 2020, we will dive deeper into the more resilient and promising advertising sectors, such as e-commerce, education, finance and Internet services, to seize potential growth opportunities.

Aside from our 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 Croods and the Death of Love throughout the year, which drove strong organic revenue growth.

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 ACG users.

Other smaller businesses that we are incubating such as live broadcasting, talent agency, digital literature and IP licensing, have all benefited from the significant synergies created by our content ecosystem and are natural expansion of our IP-based development value chain, which leads to the next part of my discussion, our content.

During the fourth quarter, we continued to focus on delivering high-quality content and achieved a number of breakthroughs 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.

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 include: The Thunder, Go Go Squid!

and A Little Reunion as well as the aforementioned Qing Yu Nian and Spirit Sword Mountain.

The popularity of these titles demonstrates our growing ability to identify and deliver a 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 costume drama launched in late January, these popular content will help drive subscriber growth.

For variety shows, in the fourth quarter, we released Season 6 of our flagship talk show, Qipa Talk, which is the longest-lasting web show in the industry.

I'm proud 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 3, which will take place this quarter.

We are continuously building strong IPs of multi-generation shows and that drive significant long-term value for us.

On the other hand, we would like to highlight our consistent innovation around developing new themes and new formats of variety show content.

Our 2019 new shows, The Big Band and FOURTRY, have both garnered overwhelming success.

Let me take FOURTRY, the star-studded original fashion reality show, as an example.

Leveraging its pop culture appeal and growing influence on fashion trends, we launched our own fashion brand, FOURTRY, and developed over 270 co-branded SKUs to embrace the new consumption trends in the market.

This multi-dimensional development process will help us maximize 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 pipeline not only covers highly popular mainstream shows, but also expands to various new content runways that appeal to even more diversified user groups.

Content innovation is at the core of our strategy and the talent is key to content creation.

In 2019, we entered into partnerships with highly-specialized 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.

And 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 platform and explore new and innovative ways to improve content creation, distribution and monetization.

In the fourth quarter, we launched an innovative AI application called AI Radar, which supports the real time recognition and search of information from video images, and also provide users with an interactive feature to directly buy a product while watching a video.

This technology has been applied to various content across our platform, including fashion show, FOURTRY, this quarter.

Cybersecurity 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 the grant of verification certificates ISO 27001 and ISO 29151.

With the growing user demand for diverse entertainment formats, we plan to launch a YouTube-mode app named Suike.

To date, the YouTube model has not grown to scale in China due to a mixture of complex factors, but we believe that with the growing deployment of 5G and AI technology, the market potential for a similar app will grow significant 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 mode to scale.

To lead this new and important initiative, 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's Degree in Computer Science and Technology from Tsinghua University.

In conclusion, 2019 was a challenging yet fruitful year.

We further strengthened our IP-centered content ecosystem while growing and diversifying our revenue streams.

I'm proud of what we have achieved during the year and look forward to 2020, which marks 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 40 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.

The 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 contents and international contents this year.

All in all, we are more confident than ever in our future growth prospects.

Before I conclude my prepared remarks, I would like to quickly comment on the recent outbreak of 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 0 infection among all of our employees around the country.

In addition, we have always been committed to maintain high standards of corporate social responsibility.

We produced various relevant video content that help 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 toward future growth prospects which remains intact.

With that, I will turn the call over to Xiaodong to go through the financials.

Good morning, everyone.

Let me go through our financial highlights.

For the fourth quarter of 2019, iQIYI's total revenues were RMB 7.5 billion, up 7% year-over-year.

Total revenues in 2019 were RMB 29 billion, up 16% year-over-year.

Membership services revenue for the fourth quarter were RMB 3.9 billion, up 21% year-over-year.

Membership services revenue in 2019 was RMB 14.4 billion, up 36% year-over-year.

The increase was primarily driven by the growth in the number of subscribing members.

Online advertising services revenue for the fourth quarter was RMB 1.9 billion, down 15% year-over-year, primarily due to the challenging macroeconomic environment in China.

Online advertising services 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 intensified competition in advertising business.

Content distribution revenue for the fourth quarter was RMB 878 million, up 68% year-over-year, driven by higher 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 we distributed during the year.

Other revenues for the fourth quarter 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 game business.

Other revenues in 2019 were RMB 3.7 billion, up 30% from 2018, driven by the growth of a number of business verticals, especially robust growth of our games business after the acquisition of Skymoons.

Moving on to the cost of revenues.

Our cost of revenues for the fourth quarter were RMB 7.9 billion, down 7% year-over-year, primarily due to the lower content cost, partially offset by the increase of other cost items.

Content cost for the fourth quarter were RMB 5.7 billion, down 13% year-over-year.

This was a combined result of certain major titles being launched late in the quarter as well as the less expenses recorded relating to the original content.

Cost of revenues in 2019 was RMB 30.3 billion, up 12% from 2018, primarily driven by the higher content costs and other cost items.

Content cost in 2019 were RMB 22.2 billion, up 6% year-over-year due to our continued investment in our comprehensive and diversified content library.

Turning to operating expenses.

SG&A expenses in the fourth quarter were RMB 1.4 billion, up 15% year-over-year.

SG&A expenses in 2019 were RMB 5.2 billion, up 26% from year 2018.

This was primarily due to the increased sales and marketing expenses related to certain iQIYI apps and our game business.

The full year [increase] (corrected by company after the call) was also due to the higher share-based and personnel-related compensation expenses.

Our R&D expenses in the fourth quarter was RMB 711.3 million, up 17% year-over-year.

Research and development expenses in 2019 were RMB 2.7 billion, up 34% from the year 2018.

The increase was primarily due to our continued investment in R&D staff.

Operating loss in the fourth quarter was RMB 2.5 billion compared with operating loss of RMB 3.3 billion in the same period of 2018.

The operating loss margin for the fourth quarter was 34% compared to that of 47% in the same period of year 2018.

Operating loss in 2019 was RMB 9.3 billion compared to an operating loss of RMB 8.3 billion in 2018.

Operating loss margin in 2019 was 32% compared to that of 33% in 2018.

Total other income in the fourth quarter were RMB 75.3 million compared with the total other expenses of RMB 34.8 million during the same period year of year '18.

The year-over-year variance was a combined result of foreign exchange gain due to the exchange rate fluctuation between RMB and the U.S. dollar, increased interest expenses associated with our financing activities as well as the impairment loss for certain [private company] (corrected by company after the call) investments.

Total other expenses in 2019 as the RMB 967.1 million compared to a total other expense of RMB 676.2 million during 2018.

The full year variance was due to the increased interest expense, foreign exchange fluctuations, as well as the impairment loss and lower fair value gain for private company investments.

Loss before income tax for the fourth quarter was RMB 2.5 billion compared with a loss of RMB 3.4 billion during the same period of 2018.

Loss before income tax in 2019 was RMB 10.2 billion compared to a loss of RMB 9 billion in 2018.

Income tax expenses for the fourth quarter was RMB 22.6 million compared to income tax expense of RMB 79.5 million during the same period in 2018.

Income tax expenses in 2019 was RMB 51.9 million compared to income tax expense of RMB 78.8 million in 2018.

Net loss attributable to iQIYI for the fourth quarter was RMB 2.5 billion compared with a loss of RMB 3.5 billion during the same period of 2018.

Diluted net loss attributable to iQIYI per ADS for the fourth quarter was RMB 3.43 compared to a diluted net loss attributable to iQIYI per ADS of RMB 4.83 in the same period of 2018.

Net loss attributable to iQIYI in 2019 was RMB 10.3 billion compared to a net loss of RMB 9.1 billion in 2018.

Diluted net loss attributable to iQIYI per ADS were RMB 14.14 for 2019 compared to a diluted net loss attributable to iQIYI per ADS of RMB 17.01 in 2018.

As of December 31, 2019, the company had a cash, cash equivalents, restricted cash and short-term investments of RMB 11.5 billion.

Turning to our first quarter 2020 guidance.

We expect total revenues 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 and preliminary view, subject to change.

This concludes our prepared remarks.

I will now turn the call to the operator and open to Q&A.

Ladies and gentlemen, we will now begin the question-and-answer session.

(Operator Instructions)

Your first question comes from Alicia Yap from Citigroup.

(foreign language) So understood that you mentioned 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 their 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?

And then in light of these various impacts and the macro outlook, do you think you still have plans to increase the listing price for the members' subscription?

(foreign language)

[Interpreted] I will first comment on the competition landscape.

I think in terms of user traffic or advertising or membership in terms of the 3 metrics, our self and Tencent Video and YouTube -- sorry, Youku, all together combined, we already take up 80% plus to 90% plus of the overall market share.

This landscape has been very stable, and we didn't see any sign of major change to this landscape.

So I think that's my comment on that.

And secondly, on your question of movie that are licensed by Bytedance.

Yes, the license of top-quality movies during the Chinese New Year.

But in our view, the free model, putting very top movies 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 for a drama series or any other content.

So that's not a normal model.

But in terms, if you want to use our movie to as a user acquisition approach or for marketing purposes, that's okay, but it will not cause a major model change for industry.

Your next question comes from Eddie Leung from Bank of America, Merrill Lynch.

(foreign language) My question is about short video or mini video app.

I remember in the past, we already had a couple of short video apps from iQIYI.

So 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?

And where and how much we are going to invest?

(foreign language)

[Interpreted] There are currently 2 forms of video app in China.

One is a long-form video platform like our self.

This is benchmarked to Netflix model in the U.S. And the other one is what we call mini video, which are mainly comprised of the very short, which is shorter than 60 seconds long video content such as Douyin and some other apps.

All together 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 7 to 8 minutes or 10 minutes longer, which is more similar to the YouTube model, this kind of app is quite more in China.

I would think that's only less than 100 million of DAU currently.

But the YouTube model, by far, is the biggest is the #1 in terms of time spent around the globe so I think there's a lot of opportunity over there, and we are developing a new app called Suike.

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.

Your next question comes from Thomas Chong from Jefferies.

I have a question about the membership business.

Can management comment about how we should think about the net add in 2020 as well as the ARPU trend?

(foreign language)

(foreign language)

[Interpreted] I would like to comment on some impact of the coronavirus, which obviously have been over a month now.

And because a lot of people stay at home, we have observed some big traffic hike as well as some beneficial effect on our membership net addition.

However, with a lot of companies, 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.

So that trend is just temporary.

And how that will trend over to Q2, Q3 and Q4, that still is -- needs to be observed.

So that -- so far, we cannot give you a guidance for the full year net addition.

But we will continue to invest in our content offerings and improve our user experiences as well as offering more and more convenient payment methods for our users to grow our membership business.

And another point to your question is we do launch a new service product, called advanced viewing, in the fourth quarter.

We have applied that model to several content, including Qingyunian and iPartment five and something of that service, which enables those who are already our members to pay some extra fees to get more advanced and quicker access to the episodes, which, as of now, I think, so far, has been seeing good results.

And we will make this model into a routine practice in our membership service going forward.

But because this kind of advanced viewing content only account for a small percentage of total content offerings, so the revenue contribution is not material in Q4.

And also, the ARPU contribution is not that significant in Q4 and Q1, I would say.

But in the future, we think-- in addition to this advanced viewing, we believe we will have some other initiatives, including narrow down the discounts.

And our list price is RMB 19.8 for Android users and RMB 25 per month for Apple users, but because of some discount and the promotions, our effective ARPU is only RMB 10 plus.

So that's -- we will narrow that discount.

And 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 post the coronavirus.

Your next question comes from Wendy Chen from Goldman Sachs.

(foreign language) I wish everybody good health and safety.

So my question is about content costs.

And we see that in the past year, content costs 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?

And what is our ideal content cost as a percentage of revenue cost in the long run?

Wendy, this is Xiaodong.

The general trend of content costs will continue to be optimized in the next few years.

You will continue to see it as a percentage of revenue, and the content costs will continue to decrease in the next few years.

I don't see any negative drivers now that content cost will go in other directions.

No matter the price of license copyright, the quality and the monetization for our original content.

So the answer is, yes, definitely, we'll see a positive trend of content cost structure in the next few years.

Your next question comes from Ella Ji from China Renaissance.

(foreign language) So my question is -- my first question is regarding the newly added subs during 1Q.

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 opportunities -- is there an opportunity to expand it to the lower-tier cities that you didn't have a chance to touch in previously?

Second question is about the new mid-length video app, Suike.

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 costs.

Just wonder if you can help us understand the quarterly volatility in the content cost in the dollar amount level.

Ella, this is Xiaodong.

I will comment on your first and third question and then let Dr. Yu Gong to comment on your second one.

First, about the membership business in the first quarter, 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 fourth quarter last year not 100% new subscribers because the majority of those news subscribers had been our membership business users in the past few years.

As I commented before, in the past 2 to 3 years, we accumulated over 300 -- near 300 million paying subscribers.

So the base is quite big for most of them are come from the paid users once before.

But definitely, the recent, the new content and the entire environment will help us to penetrate to those areas which are less active before, including lower-tier cities', that's true 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 the like, say, the production schedules, supply, the approval process.

So a lot of effect behind that.

I also comment once before, it's very important to understand that actually the content investment does not necessarily has something to do with revenue in that quarter, it will have a lag effect.

For example, most of the effect of content costs on the membership business will be reflected in the quarter after or even 2 or 3 quarters later.

So basically, it's not a short-term business so that's why I encourage you guys to look at a longer period than individual quarters.

And that's my thoughts.

I will let you Dr. Yu Gong to comment on the second one.

(foreign language)

[Interpreted] For Suike, we have basically 2 types of content.

One, we call it PUGC, professional user-generated content.

They come either from MCN or individuals or from professional institutions who upload their content, then we split some revenue share, either 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 an additional distribution channel for our content and also improve our monetization, and meanwhile help to dilute our content, overall content cost.

And I also want to comment on -- because YouTube, since 10 years ago, YouTube has developed very fast and became the big -- the #1 highest time spent all over the world.

But in China, that haven't really take up -- take-off in China because of some cultural background reasons and then also technology reasons.

But why we are starting to look at this model is because things have changed now.

We have seen approving 5G technology.

Because if you look back, when the 3G comes, it made the Weibo, which is a picture-rich app, become a lite app.

And then in the 3G to 4G era, those mini video become a lite app in user's view.

And now the 5G is coming and we believe that several minutes long video app will become a light app for the audiences.

And also, apart from 5G, the AI is also developing very quickly, and that will help the trend that enable people to view the app as a very lite application.

Thank you.

And I'm sorry, I want to add, so the last one is, Dr. Gong also said, the Suike incubation will take several years, will not be something material this year or next year.

That's all.

Thank you.

We still got time for one last question.

Our final question comes from Tian Hou from T.H. Capital.

(foreign language) 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 is going to look like?

Also for iQIYI, what is our status in terms of a content inventory?

(foreign language)

[Interpreted] There are several types of content.

For dramas, which contributed most traffic as well as the net additions for us.

I think because the production cycle for this drama content usually are very long, so if the coronavirus caused us 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, 3 weeks, that will be a near-term impact of that.

And also for movie content, for most of the theatrical movies, there are several window period of viewing.

First will be the box office launch.

But because of the virus, most of the theatrical movies have been delayed their window period.

And the second window will be on our platform.

We have seen some -- a few of those theatrical movies, for example, enter into the Fat Dragon that's a movie we and Tencent Video co-launched on our platform on the pay-per-view basis, which have seen very satisfactory result for us.

But most of the other movies will still be waiting for a delayed window for the box office launch.

Luckily, the movie content is a very small part of our overall content offering so it's not a big impact.

Thank you for your question, and I wish all the participants and your families are healthy and for everybody.

Thank you.

I would now like to hand the conference back to management.

Please continue.

Okay.

Thank you, again.

And if you have any other questions, please feel free to contact us.

Thank you.

Thank you.

Bye-bye.

Ladies and gentlemen, we have reached the end of our conference call.

Thank you for participating.

You may all disconnect.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]