The EconomistAugust 22nd 2020 Business 55L
aunched in2010, iQiyi has grown used
to the foreign press calling it “the Netflix
of China”. Not the worst nickname, given
the videostreaming pioneer’s success. But
Gong Yu, iQiyi’s founder and boss, insists
that his firm is more accurately described
as “Netflix plus”. A bold claim for a loss-
making business worth one-fifteenth as
much as America’s (cash-generating) en-
tertainment powerhouse with a market
value of $214bn. Still, Mr Gong has a point.
Like Netflix, iQiyi offers customers a
deep catalogue of licensed and original
content. Unlike Netflix, which relies al-
most entirely on subscription fees, iQiyi
has multiple revenue streams. “Member-
ship fees”, which start from 19.8 yuan
($2.87) a month, accounted for just over
half of iQiyi’s 7.4bn yuan in revenues in the
second quarter. The rest came mainly from
an online store (which sells “entertain-
ment-related merchandise”), a nascent
mobile-gaming arm, an e-book business
and advertisements; iQiyi operates a “free-
mium” model which allows stingier users
to stream some content free of charge pro-
vided they agree to watch ads.
Conveniently for iQiyi, which does little
business outside its home market, Netflix
is blocked in China, under laws that ban a
lot of foreign content. But that is not to say
that China is free from the streaming wars
of the sort that pits Netflix against rivals
like Disney, hbo (owned by at&t) and
nbcUniversal (belonging to Comcast). Far
from it. Mr Gong is battling Tencent Video,
part of the eponymous technology con-
glomerate. It overtook iQiyi at the end of
June with 114m video subscribers to iQiyi’s
105m (see chart). Mr Gong’s firm shed 14m
subscribers in the most recent quarter
while Tencent Video, which also runs a
freemium model and charges subscribers
20 yuan a month, added 2m.
IQiyi insists the setback was down to
one-off factors, such as virus-induced dis-
ruption to film production, which tempo-
rarily emptied the content pipeline. Per-
haps. But Tencent Video offers a richer
selection of English-language content, in-
cluding hit television series like “Cherno-
byl” and “Silicon Valley”. More important,
the rivalry between Tencent Video and
iQiyi is a proxy war between mighty Ten-
cent and fading Baidu, a search firm that is
iQiyi’s majority owner. Indeed, iQiyi
seemed to concede as much in its latest an-
nual report, writing that “competitors in-clude well-capitalised companies that are
capable of offering compensation pack-
ages more attractive to talents.”
Still, as Westerners who pay for a few
video subscriptions can attest, streaming
is not a zero-sum game. Gigi Zhou of bo-
com International, a broker, reckons the
Chinese market will soon be big enough to
sustain both iQiyi and Tencent Video,
which also has yet to make money. Ms
Zhou expects 400m Chinese to subscribe
to video-streaming platforms by 2023, up
from some 300m in 2019. So long as no new
rival emerges, each firm could capture
around 150m, helping them spread costs
over more subscribers and so turn a profit.
Before streaming peace can break out,
iQiyi faces another fight. On August 13th it
said it was under investigation by Ameri-
ca’s Securities and Exchange Commission
after a short-seller accused it of inflating
sales data, a charge it denies. If found
guilty, it may have to delist from New York’s
Nasdaq exchange. The firm’s stable share
price implies investors’ faith in battle-
hardened Mr Gong is unshaken. 7China’s streaming wars may end with a
duopolistic peaceEntertainmentA big-sum game
Upwardly mobile
Worldwide video-streaming subscribers, mSource:Companyreports200150100500
2018 19 20NetflixTencent VideoiQiyiMr Gong summons his troopsA
recession isnot a good time to ask
your boss for a pay rise. So ig Metall,
Germany’s biggest trade union, is mulling
other perks its metal-bashing members
might extract from employers. On August
15th its boss, Jörg Hofmann, told the Süd-
deutsche Zeitungnewspaper he would push
for firms to adopt a four-day working week.
German workers should not make Fri-
day leisure plans just yet. Employers have
not responded—it is mid-August, after
all—but they are likely to put up a fight.
Nonetheless, Mr Hofmann’s salvo ahead of
collective-bargaining talks later this year
points to a new stage in European labour
relations—and a culmination of decades of
pushing for working hours to be cut.
If you think no worker would object to a
three-day weekend, think again. Even fans
fret about trade-offs. Workers could face
longer hours from Monday to Thursday, or
a cut in pay. Some employers, notably tech-
nology startups, already dangle longer
weekends to recruit sought-after brain-
boxes, or offer flexible hours. But a five-day
slog will probably remain the norm in low-
er-paid jobs, where productivity gains
from more rest are less obvious.
ig Metall’s timing is not coincidental.
Its members agreed to forgo a pay rise in
the covid-19 crisis. Around 6m Germans
currently participate in the Kurzarbeit fur-
lough scheme, estimates ifo, a think-tank.
The 12-month scheme now looks likely to
be extended to 24 months. Hubertus Heil,
Germany’s labour minister, said truncated
working hours—and a trimmed payslip—
could be “an appropriate measure”. State
top-ups of the wages of employees who go
down to four days a week might be painted
as part of the extension.
German workers face problems beyond
covid-19. The car industry that underpins
blue-collar jobs has been slow to shift to
electric vehicles, let alone driverless ones.
ig Metall thinks cutting hours will allow
firms to retain expertise needed for the
transition, without the expense and bad
publicity of sacking workers, only to have
to rehire some later if prospects improve.
Where ig Metall goes others often fol-
low, in Germany and beyond. Its members
were striking for a 35-hour week long be-
fore it became law in France. A four-day
week equates to around 30 hours. If union
bosses pull that off without causing big
cuts to workers’ pay, they truly will deserve
an extra day of rest. 7BERLIN
A powerful German union is pushing
for a four-day weekWorking hoursWeekend plans