China’s Top Netflix-Style App Is Finally Exploring Social Video

China’s biggest Netflix-like streaming site finally has a plan to get into the rapidly expanding arena of social and user-generated short-form videos. But iQiyi Inc. reckons it’ll take as long as three years to get there.

The Baidu Inc. spinoff had long recognized the potential but chosen to focus on its core business out of necessity, iQiyi Chief Executive Officer Gong Yu told Bloomberg Television Thursday. It wants to become a major player in that burgeoning arena in one to three years.

The company is targeting a market that’s already surging. Apps from Kuaishou to Douyin have taken China by storm, helping users shoot and share millions of clips featuring everything from dancing teens to noodle-slurping villagers. Tens of millions of users spend hours each day glued to smartphone screens, luring advertisers and sky-high valuations. That’s a problem for iQiyi and WeChat-operator Tencent Holdings Ltd., which are trying to sustain user engagement and pay ever-rising costs to buy or make professional shows.

“Over the last eight years the speed of development for long-form video was too fast, the resources needed were too high, and the competition particularly fierce so we couldn’t be distracted,” he said. “It’s not that we didn’t notice the trend, it’s that we couldn’t invest in it, else we’d have lost in our main business.”

The format is rapidly becoming a global phenomenon. Douyin’s international version — Tik Tok — was the most-downloaded non-gaming app on Apple’s store during the first quarter of 2018.

“It’s different now. We’ve noticed apps featuring short-form video are taking off, and super-popular apps are emerging,” the executive added. “So I hope with one to three years of effort, we can create a super-popular short video app.”

The battle to become the Netflix of China has inflated production and content costs. That’s pressured margins at services run by Baidu, Tencent and Alibaba Group Holding Ltd.: iQiyi, Tencent Video and Youku Tudou, respectively. To compete, they often offer discounts and subsidize new customers. Gong said that this was a feature of Chinese and Asian markets – quite unlike Western markets, where users are more willing to pay full-price for premium streaming services like Netflix.

— With assistance by David Ramli, Haze Fan, and Yuan Gao