iQIYI’s Playbook for Tech-Empowered Entertainment (Tech Strategy – Podcast 209)


This week’s podcast is about iQIYI’s tech strategy.

You can listen to this podcast here, which has the slides and graphics mentioned. Also available at iTunes and Google Podcasts.

Here is the link to the TechMoat Consulting.

Here is the mentioned graphic:

Cheers, Jeff


Related articles:

From the Concept Library, concepts for this article are:

  • Digital Operating Basics 2: Never-ending improvements and personalization
  • Entertainment / Video

From the Company Library, companies for this article are:

  • iQIYI

———–Transcription below

Welcome, welcome everybody. My name is Jeff Towson and this is the Tech Strategy Podcast from TechMoat Consulting. And the topic for today, ICHE’s playbook for tech-empowered entertainment, really video entertainment, television shows, movies, high quality stuff. Now I was out at the headquarters about two weeks ago with the tech tour. We took a group of people into Beijing, saw some cool companies, did a lot of talking, and it for me it was one of the highlights because I think it’s one of the most important companies in sort of this intersection of how tech, really digital, is combining with entertainment. And in the most interesting cases, not just, hey, we can make quick videos and memes and it’s fun and we can generate lots of little pictures. Yeah, that’s entertainment and it its content and it’s fine. But the high quality entertainment, like the hit TV shows, the best movies, right, to really high level, high quality storytelling, which is a very powerful thing. I mean, there’s a reason everyone pays so much attention to entertainment, but to combine that sort of highest level of entertainment with tech, it’s a very good question. And there’s only a couple companies that can do that. One, because there’s only a couple companies that can create content at this level. HBO, Disney, James Cameron. There’s a handful of people who can do this content-wise to begin with. And then if you combine that with, well, how many of those have deep tech expertise? Well then the list is very, very short. And in fact, I think IGE, which has always been sort of a premium content entertainment company and a tech company and its own by Baidu which just so happens to be the greatest generative AI company leading generative AI company of China, Asia right now. That combination makes this a very cool sort of question. So we did the visit, I’m not going to go through too much of that right now, but they did put out a very good summary of basically their tech strategy, which they call technology empowerment. And I’m going to sort of go through that and I find it really helpful. I think it’s good strategy. I like that it links up with my own frameworks very nicely. I always appreciate when companies do stuff and it fits my own frameworks makes me feel good. So it lines up, so I’m just gonna detail this out. This won’t be that long of a podcast. Turns out I picked up pneumonia in China. I was really sick for a while and I kinda started up again last week but yeah, it turns out I got pneumonia. So that’s, I was wondering why it was so, I don’t just kept going on and on. So, anyways, that’s all over now. Okay, so let me get into the content. First we do our standard disclaimer, nothing in this podcast or my writing website is investment advice. The numbers and information for me and I guess maybe incorrect. There be a set of opinions expressed may no longer be relevant or accurate. Overall, investing is risky. This is not investment legal or tax advice, do your own research. And with that, let’s get into the content. All right, no real concepts for today, just I guess digital operating basics number two, which constantly using data, digitizing your operations, using the data to constantly improve your product quality, the customer experience, and so on. DoB2, that’s kind of relevant for today, but it’s really the only concept that we touch on. Now, I.G. Interesting company, profitable now $4 billion-ish US dollars in revenue per year, 8% to 10% operating profit margin, which is actually pretty impressive because there was a bit of a long hard slog in terms of being able to monetize video in China. Because historically there was not a lot of digital marketing, Historically there was no consumer legacy of paying for content. You could just go down and get a pirated DVD on every street corner. So there’s been sort of this long slog of IGE creating content and slowly getting toward profitability which they achieved in the last 2022-2023. That basically fell out of mostly from subscriptions. Secondarily from advertising, and then they have other types of revenue like IP monetization. For those of you who are subscribers, I’m sending you a long article on this, and about 2,000 words, talking a lot about IP monetization for IGE, which is actually kind of a really cool subject because, you know, IP monetization is typically, you make toys, you do tie-ins, you do backpacks, you do whatever, ’cause you have a hit movie. That’s standard Hollywood, whatever else. Because everything is manufactured in China. That interaction happens very, very quickly. It’s a much more dynamic sort of IP monetization situation. Or if you get a hit show on a Thursday, you can roll out new products in seven days. It’s the same close link between consumers and Chinese manufacturing that we see playing out in companies like Xi and Ntimu. We can see that in terms of monetization of IP, whether it’s a hit movie or longstanding. Anyways, I’ve written a lot about that. It’s actually, I think, kind of cool. Take a look at it. Okay. look at it. Okay, so as mentioned, IGE sitting right at the intersection of long form high quality televisions and movies and tech. And the tech piece has been there for a while, a lot of AI, a lot of data analysis, a lot of software tools to make your production more efficient. But obviously, generative AI have just kicked that into the stratosphere because generative AI basically makes the creation of content better, cheaper, faster, democratic. It’s huge, so obviously it hits content businesses more than anyone else. And I’ve written a bit about this, about Ichi over the last year, how they are integrating AI and now generative AI into the production side. And most of their content, it’s serial dramas like, you know, multiple seasons of famous drama. They do real well in the drama area. There’s variety shows like singing competitions, things like that. There’s variety shows like singing competitions, things like that. There’s feature films. So they’ve been integrating AI and now generative AI into the production side which is quite complicated. And that can play out at lots of levels. It can be planning. It can be production management. It’s more and more becoming things like script analysis, character development, dialogue, where you can feed these things into generative AI and it can tell you, hey, there’s not enough conflict, hey, we need to make this character have a better character arc. So it’s starting to play into the writing. And then obviously it plays into marketing and distribution. Instead of making one poster to advertise your film, you make 500 of them with generative AI and you test them and you see which one gets a better response distribution things like that. That’s sort of a cool bucket. The bigger bucket which is on the front tier, which I’m excited about, is what we call virtual production. And I’ll talk about that. virtual production. And I’ll talk about that. But okay, so there’s a lot going on, and they’ve got a lot of pilots and they’re integrating Baidu’s tools a lot. But they put out actually a slide, I’ll put the graphic in the show notes, it won’t show up in the podcast notes, but if you click over to the website where the podcast listed, you’ll see it. You know, their media relations team actually put out a little chart describing their technological empowerment and It’s actually great. It’s a really good summary like it’s worth looking at this little graphic And it actually captures 80% it’s it was pretty good little chart And I usually kind of throw stones at charts and things and here’s what they say basically they say this is the description of how they’re using tech to empower their business. We seek to empower industry and content creators with innovative technologies to improve user experience that that’s important, and enhance video production, industrialization. That’s actually a really good summary. What they’re doing is they’re taking tech and they’re leveraging it into two scenarios. Scenario one, how do we improve the user experience? And there’s a lot of dimensions to that. The viewing experience going to the theater, chatting, community, VR. There’s a lot within user experience where the frontier is constantly moving forward. And we’re talking users, we’re talking about viewers, content consumers. You could put advertisers in there as well, which are important, but let’s kind of skip over that. Now, the second bucket is which are important, but let’s kind of skip over that. Now the second bucket is to enhance video production industrialization. That’s actually kind of cool because they’ve been using this phrase. It’s been coming from the CEO. The industrialization of video production, which is, OK, we’re leveraging all these tech tools to make production more efficient, more effective, better, cheaper, faster. But we’re not just doing it. I mean, most video production, TV show, film, you’ve got a small production company with a team and the team will work on the film for a while. And then you’ve got another team for another project and another team. It’s all and you know a company like IG will have 50, 60, 70 of these production projects team. It’s almost like a workshop approach to creation and production. This the idea is let’s shift it more to something like a factory. Let’s industrialize video production and move away from this workshop type model, which is kind of how Hollywood works. And by creating tools, so instead of giving tools to people running these little workshops, let’s build a big factory that anyone can use to create video. So it’s interesting the CEO keeps mentioning video, the industrialization of video production, which is pretty cool language actually. Okay, so let me talk about the first bucket using technology to improve the user experience. Now, if you’ve been reading my books and following me, I have my standard digital operating basics. You know, the seven things that most every company has to do as they increasingly digitize. You know, the seven things that most every company has to do as they increasingly digitize. You got to build your digital core, you got to be more connected, you’ve got to go for scalability. And number two on the list, DOB2, digital operating basics two, is to use data for never ending improvements to the user experience. And this is the race that everybody’s playing and it never ends. You’ve got a good app, let’s make it better. You’ve got some good content, let’s make it better. You’ve got a series of services, let’s add some more. This never end in this game where, in theory, this is where people talk about data network effects where the better the service and the user experience the more people use it that for generates more engagement and data we use the data to then make more improvements so they talk about it like a flywheel or a data network effect I don’t really think that’s true I think think you just have to be data-driven, and the number one thing you use data for is to constantly improve. You always have to be moving. And within this sort of never-ending customer improvements, the biggest lever is personalization. So DOB2 is basically never-ending and personalization because the more you personalize a service or videos or experiences or product mix to individuals or groups, that’s the biggest way to improve the experience. It’s just the biggest lever you can pull. So anyways, I’ve been talking about DOB2 for, I don’t, years. So, you know, their first focus for tech enablement empowerment is basically DOB2, which is, and they, in the graphic, which you can go and look on the webpage, they basically break that into four types. And it’s a good list. It’s actually, I mean, it’s very well thought out. This is a very good list for how to improve the user experience as a high quality video TV production company. And here they are. So number one, the language is a little vague, but number one is generative AI integration. Basically, this is personalization. That as you watch videos, they are going to start to show you videos that show you more of the characters that you like or the plot types that you like or the actors that you like. They call that generative AI integration, which I don’t understand. I would just call that data driven personalization. And they cite that by doing this over the last year, they got a 40% increase in user engagement. Okay, this is using data to personalize the content that you’re teed up and watching. Fine, that’s standard. TikTok does it, YouTube does it, totally works. But number two, interactive experience. This one’s pretty cool. They’re, you know, IGE is basically a series of apps. You know, five or six apps, one for kids, one for sports, one for the main TV shows. And you can watch it on your TV, you can watch it on your phone, you can watch them on your iPad. They’re building functionality into these apps so that viewers can engage and interact, not just passively watch. So running chats, lots of comments, joint singing and karaoke and things like that. And that’s powerful. That’s going from one way passive consumption of media to two way interactions, chatting community, very powerful. You know, they do. One of the benefits of these high-quality type TV shows is you can build communities around them. There are communities that just talk about Star Wars and Game of Thrones. Most products can’t do that. So you can have very vibrant chat rooms and communities and people making fan films and arguing. Okay, so this is about building that into the apps, more engagement, two way. And that gets you wins across the board. Number one, it gets you better retention from your customers. People like arguably the most powerful type of customer retention is not loyalty programs. It’s community. If you’ve joined a club, a church, a running group, something where your identity is deeply tied to this community, those people never leave. Communities, the most powerful type of retention. It also generates tons and tons of data which then makes you better at DOB2. So that’s number two, sort of interactive experiences as a upgrade to the user experience. Number three, VR immersive theater. This is more tech. This is basically them moving beyond just staring at a video screen, staring at your iPad. This is okay. Let’s put some VR headsets on. Let’s start to do spatial tracking. And they’re building some immersive, I think, in-person theaters around Chinese cities where you can go see the films there. So that’s just tech on the viewing side. And last one, I don’t know how you pronounce it, they call it XVave Max. This is basically making the screens better. Going from high quality screens to ultra high definition screens. Going to even 100 inch televisions with ultra high LED screens, right? You know, and Samsung and Sony and all these companies, they keep upgrading their TVs. But for that to work, the content producers, the people making the films also have to start filming and generating at a higher level. Like I’ve got a crazy high quality television. Like it’s so vibrant, it’s almost spooky. It’s amazing for watching documentaries that they film with cameras in the jungle because the quality is so crisp. It’s not great for watching films like The Avengers because the way they film The Avengers and make the CGI, the quality is not up to the level of my TV. It actually looks a little fuzzy. So there’s that sort of interaction between screen quality and then the content being produced. So those are their four buckets, data-driven personalization, interactive experiences, more immersive VR, not just screens, and then making the screens better. That’s the plan for bucket number one as of what they’ve published. That’s great. I mean, I think that is a, like, if you could see if they’re systematically investing and making progress every 3-6 months against those 4 buckets over 5-10 years, it’s totally believable that their user experience will stay ahead of most of their competitors. And this is a race that basically never ends. But I just thought that was really well thought out by people who have been doing this business for a long, long time. Okay, so that’s bucket number one. All right, now bucket number two in the soul, this will be the last bit for today’s, two industrialize and virtualize production. So tech meets entertainment. You have the user side and then you have the creation, which is mentioned is historically lots of production teams and crews, you know, writing scripts over years, planning production over months, doing distribution, lots of set building and cameras and hiring of actors and all that, you know, very much sort of workshop type production. And the idea is how do you go to an industrial level? And that’s interesting. Now, it’s one comment on what Ichi is doing. Their entire business model is predicated on being the highest quality. There are two revenue streams, the big ones are subscriptions and advertising. You know, what drives subscriptions? Well, you have to have the hit TV show that everyone wants to see. You have to have Game of Thrones. Everybody signs up. If you’re just churning out mediocre content, it’s kind of like Netflix. It’s much harder to build a subscription based model, but if you’re hitting one out of the park every six months, every year with the show that everybody wants to watch, you’re going to see these jumps in your subscription. You’re also going to command far more power with advertisers because you’re speaking to the upper middle class, you’re speaking to the consumers that are the most engaged, you know, advertisers want to be on the hit show. So their business model sort of puts them in the bucket of having to continually hit them out of the park to have hits. That’s actually very hard to do consistently. Most companies want to do this. Everyone wants to be HBO. Most companies can’t pull it off. HBO’s pulled it off, Icheese pulled it off. Disney used to do it. Now, you know, Star Wars and Marvel. They all stink now. But to do that consistently is actually pretty rare. I’ve looked into this in the past and it actually has a lot to do that consistently is actually pretty rare. And I’ve looked into this in the past. And it actually has a lot to do with culture. And what these companies really are, they’re almost artist colonies, where you get highly creative people and they’ll work together in certain environments. But it’s almost not like a business. It reminded me far more of an artist colony. OK, so industrialized production, the other bucket of tech meets entertainment. Now, they’ve been doing this for a long time, but we would put it all under the, they call it intelligent production. They have a couple buckets, three buckets. They call it intelligent production. I would just call it data analytics. You know, they have these production processes, so they’ve built libraries of assets. They have software for managing the production. They have software for checking scripts. They have software for keeping things on budget. They have software for hiring and contracting actors. You know, They’ve been building software tools against their operations for a long time, and they’re getting smarter and smarter in terms of data. So I would put this all under the area of just data-driven operations. Some of its classic data analysis, some of it is more predictive AI, as opposed to generative AI. Now, they call that all under the intelligent production, but I think it’s just data analysis and software, and they’ve built a fairly big portfolio of software over the years. Okay, so that’s their first bucket. They call it intelligent production fine The second bucket they talk about is AI powered production again the language is Bit vague this is more interesting. This is when we’re starting to integrate generative AI tools into the production process for the first time Which they’ve been doing for about a year now a year and three months since chat GPT kind of landed. So that’s script analysis. You know, generative AI is very good at writing scripts. I’ve done this for fun. I’ve said like write me a script for a Star Wars where Darth Vader wins at the end of Return of the Jedi and it will generate a script and it’s good. Dialogue improvements, better marketing materials, better poster generation. I mean, you can even do sort of character design where you, generative AI right now is very good at generating text and it’s very good at generating images. So you can do characters, you can do sets. If you want the Batmobile, you can generate 100 different versions of the Batmobile. Now that’s all text and imaging and sound and sound effects. Generative eyes great at that already. I mean it’s just great. And it’s not just going to let you do it cheaper. So it’s not just productivity. It’s going it cheaper. So it’s not just productivity. It’s going to be better. It’s going to be faster. It’s going to be cheaper. And it’s going to be higher quality. And anybody can do it. It’s not like you have to have all the people that went to art school for four to six years. Now anyone in the office can start generating scripts. So it democratizes the capability. All of that is going to make it better. And for a company like IGE, that’s really the goal. Yes, it’s going to be more efficient and productive, but the real goal is to increase the quality of the films. That’s where they win. And that’s what they’re doing. So we can see that coming, but mostly we’re talking about text, we’re talking about images, we’re talking about marketing material, we’re talking about character pictures, things like that. The real big bucket obviously is when it moves into video creation. And the generative AI is not there yet. Sora TV, Pika Labs, they’re doing real well. Animation is there now. If you go to Pika Labs, you can make animated films that look pretty much as good as Pixar now, because animation is a lot easier, right? But real life TV dramas, no, not there yet. But the third bucket is virtual production. And this is the industrial scale. This is the analogy I use for this. This is like Epic Games gaming engine. People who make video games cannot create anything like the gaming engine that Epic Games uses to create. It’s complicated. It took 20 years to build it. It’s a massive capability. So what they do is they take their gaming engine and they license it as a service to all the smaller gaming developers, two to three dudes in a room. And suddenly they can create films and video games at the highest level. That’s what IGE looks like they’re building. When they talk about industrialized virtual production, I think they’re building a massive video production engine that anyone can then license and use as a service. And you have to feed in various inputs and You have to feed in various inputs you have to feed in the scripts You have to feed in your pictures. Maybe you’ve filmed some of it with a camera Maybe you’ve filmed part of it on set but part of the set is just a green screen and you feed in all those pieces and then Using virtual production you create the final You know high quality video. We saw some of this at IGE, it was pretty interesting. Here’s a TV drama, it looks amazing. Then basically only about a third of the screen was filmed and the rest was just generated in virtual production. A person walking on grass and then suddenly there’s mountains and dragons flying in the air but the only thing that was filmed was the person walking on the grass. So that virtualized production is pretty amazing and you can feed in all sorts of things like, “Okay, you can do some filming, you can hire virtual actors. You can go to the digital asset library, which is something Icheese building.” Everything that they use in all their TV shows is being digitized. So if you see a car or a carriage in a film you like, you can license that carriage and tweak it and use it in your own film. So there’s this massive library of digital assets you can feed into the virtual production. Talent actors, people who have cameras, I mean that’s kind of like Upwork. You can hire people at will as part of your production. So you can see they’re building sort of a suite of services that will let anyone make the highest quality entertainment and the center of it is the engine. But it’ll be a whole suite of services around that. Anyways, I’ve talked about that before. I think it’s exciting. I think there’s going to be a couple companies that have the capability to do this. And my standard question for IGE is, when are you going to start selling this as a service? And I don’t get really an answer. But if you go to their website right now, you can actually see their digital assets online and you can buy them. If you want a cool car to use in your movie, there’s list and list of cool cars. If you want a cool set like a cave or a mountain, they have them. You can go and literally buy them right now to use in your own productions. But the gaming engine itself, the full suite of services and the suite of services will go beyond production. It’ll be staffing, short term hires, digital assets that you can access, it’ll be the gaming engine, the production engine, but it’ll also be distribution. It’ll be marketing services. It’ll be integrating in social aspects so that when people watch your video, they can chat with others. And if you look at Epic Games, they basically offer a whole suite of services just like that. So anyways, that’s where I think it’s going. I think it’s pretty great, pretty fun. I’m right about on time, 28 minutes. So I kept an under today. But yeah, for those of you who have subscribers, I’m gonna send you quite a lot of graphics on this, especially with IP monetization advertising, ’cause those are other aspects of this that matter that I didn’t talk about. Very, very cool, very cool. Very cool. Anyways, I think that’s it for IGE for a while. We’re going to get back to AI strategy, which is something we got into a month or so ago. We’re going to finish that out and basically come up with a short-term AI strategy playbook. It’s about half done right now, and I’ve published it already, but we’ll do the other half probably this week. Anyways that is it for me I hope that was helpful. I’m in I’m actually in eastern Java. I’m on the far eastern end of Java Island in Indonesia in a town called Malang which is basically a town stuck between two volcanoes. So tomorrow I’m gonna hike up Mount Bromo. Well not really hike but go up to the rim. And you know that’s kind of a famous trip. Everyone does the sunrise tour where you get up at like 4 p.m. and you go up and you watch the sun rise over Mount Bromo the volcano. And I was like I’m absolutely not doing that. I don’t do sunrise anything anymore in life. No so we were into the private car. We’re going up and we’re gonna have coffee, have breakfast, sit by the pool, and then we’re gonna go up in a private car and look at the volcano. But yeah, I’m not doing the sunrise. So, they thought that was kind of funny when I booked it. I’m like, I wanna do everything on the tour, but nothing before 10 a.m. So anyways, that’ll be my day. It’s going to be pretty good. Anyways, that’s it for me. I hope this is helpful and I will talk to you actually in about two days. Bye bye.


I write, speak and consult about how to win (and not lose) in digital strategy and transformation.

I am the founder of TechMoat Consulting, a boutique consulting firm that helps retailers, brands, and technology companies exploit digital change to grow faster, innovate better and build digital moats. Get in touch here.

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Note: This content (articles, podcasts, website info) is not investment advice. The information and opinions from me and any guests may be incorrect. The numbers and information may be wrong. The views expressed may no longer be relevant or accurate. Investing is risky. Do your own research.


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