Pricing updates in China's SVOD market

Price hikes are no longer new to the mainland Chinese subscription video-on-demand market. Consumers seem to be getting used to them and are willing to pay the new fees as iQIYI Inc. of Baidu Inc. recently reported substantial subscription growth in the first quarter of 2023.

Mainland China's SVOD ARPS improved 17.3% over the last couple of years in local currency. Following iQIYI's latest round of price increases in December 2022, the lowest-cost subscription fees of the basic and premium tiers were aligned among the big three streamers, which include iQIYI, Tencent Holdings Ltd.-operated Tencent Video, and Youku Tudou Inc. of Alibaba Group Holding Ltd. Prior to the first wave of price hikes, a monthly basic tier subscription with auto-renewal was the only option that cost the same at 15 Chinese yuan on the three platforms. It rose 66.7% and is now priced at 25 Chinese yuan.

Each streamer adopts a slightly different approach when it comes to price changes. With initial pricing set at a relatively lower level and under growing pressure from shareholders, iQIYI kick-started the first wave of price hikes in November 2020. Until then, the listed prices on major platforms had remained unchanged since launch. As of May 2023, iQIYI has raised its prices three times and its primary focus has been to boost pricing for the basic tier. It was only until the streamer's last round of price increases that it increased subscription fees of the platinum and diamond tiers.

IQIYI has handled its pricing more cautiously than its major rivals. It is the only major service in China that offers more than one premium tier and provides more flexibility to consumers. Those who favor a less costly subscription can opt for its entry premium tier, which enables access on the big screen. Apart from the first round of increases, the percentage increases in the second and third rounds were lower than those of its competitors.

Compared with iQIYI, which raised prices three times to reach the current level in December 2022, Tencent Video has raised prices twice and reached its current price points by April 2022, eight months ahead of iQIYI. Tencent Video launched in China a year later than iQIYI and has set prices on the higher end. Being the largest streaming platform in terms of subscription, Tencent is also estimated to have the highest ARPS in the market and accounts for the biggest share of China's SVOD revenue.

Similar to iQIYI, Tencent concentrated on the basic tier over the last two rounds of price hikes. For the popular option of a monthly basic subscription with auto-renewal, the respective percentage increases were 33.3% and 25% in the two rounds of price changes. With an annual subscription decline reported for the first time and estimated at 4.9% in 2022, Tencent could pause further price increases in the near term.

Coming in as the fourth-largest streamer in China, Mango Excellent Media Co. Ltd.-owned Mango TV did not start raising prices until January 2022 but soon increased pricing again in August of the same year. Despite having aligned its premium tier pricing with the big three, Mango TV still keeps subscription fees of the basic tier with auto-renewal at roughly 10% lower than that of the incumbent platforms. Mango TV still aims to grow its subscription base. The service rolls out promotional discounts from time to time, and its actual ARPS is still projected to be lower than its listed prices.

Given the alignment of subscription fees of the major platforms, the next price hike in the market would push prices to a higher level that most players would follow. While recent subscription growth at iQIYI seems to create a reasonable ground for the company to raise prices again, players like Tencent and Youku are observing if the churn rate stabilizes before their next round of price surges.