Streaming Platforms Control Costs via Enhanced Memberships

In a significant move on December 10, Tencent Video announced alterations to its member servicesThis adjustment primarily affects new members who purchase, redeem, or activate the Tencent Video VIP membership after December 16, 2024. Under this new protocol, these new members can log in on a maximum of three devices and can stream content on only one device simultaneously during their membership period, which marks a decrease from the previous five-device login limit and two-device streaming limit for existing membersWhile this revision is designed to clamp down on account sharing, it does represent a shrinking of member advantages as compared to the past.

The changes have stirred discontent among some usersHowever, Tencent mitigated backlash by ensuring that the rights of existing members remain unchanged, thus avoiding potential disputes over contractual obligations

This approach has resulted in relatively limited adverse reactions regarding the adjustmentsNotably, Tencent’s decision to refine its member access isn't surprising, as the trend of limiting the number of devices linked to accounts has become standard across the industry of long-form video platformsSimilar actions were taken by iQIYI, which reduced the number of simultaneous devices to one in October, aligning with global trends wherein platforms like Netflix have also heightened controls on account sharing with an eye toward sustained subscriber growth.

The discontent from users indicates a broader discomfort with how platforms manage membership rights, reflecting the immense pressure these companies face to maintain performance growthHistorically, long-form video platforms operated under more lenient membership policies, allowing users to login on several devices without restrictions

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This tactic met the demands of users who sought the flexibility of watching content across various devicesHowever, it also inadvertently promoted the emergence of a gray market around account sharing.

Membership subscription fees are a critical revenue source for these platforms, often constituting about 50% of their overall income, with iQIYI reporting figures exceeding this thresholdAs users turn to second-hand trading platforms where they can inexpensively "rent" membership accounts, the financial implications are stark for long-form video services heavily reliant on subscriber feesIn a time of explosive growth in user adoption, the leniency surrounding membership structures may have been manageableYet the industry is now experiencing a slowdown, with challenges in acquiring new subscribers and an overall saturation of the market.

As of Q3 2024, Tencent Video's paid membership count stood at 116 million, reflecting a mere 6% year-over-year growth, but signalling a slight decline from the previous quarter

In contrast, iQIYI's figures have been more troubling, witnessing a consistent drop in membership numbers over the last four quartersWhile they abstained from disclosing the precise total membership count in Q3 this year, their revenue from member services fell to 4.4 billion yuan, a 13% decrease from last year.

To ensure consistent and robust performance growth, these platforms must reconsider their strategies, specifically analyzing the repercussions of unauthorized account sharingThe focus is shifting from acquiring new members to maximizing the revenue potential from existing subscribersConsequently, over the past two years, a noticeable trend has emerged where long-form video platforms frequently revise membership rights and pricingBefore limiting the number of devices, platforms introduced hikes in membership fees, imposed streaming limitations, and even rolled out the contentious nested VIP membership system.

Ultimately, the downgrading of membership rights is an attempt by platforms to balance user experience with financial returns, a reflection of the mounting survival pressures

Presently, long-form video platforms have achieved collective profitability, yet they must grapple with significant survival challengesBeyond the stagnation in subscriber growth, there’s also intensified competition with short-form videos vying for user timeNumerous brands have voiced their skepticism regarding the marketing effectiveness of long-form videos, preferring to allocate their advertising budgets toward short-form platforms or social media channels like Xiaohongshu.

Long-form video content demands more resources to create, compelling platforms to invest heavily in production to generate popular contentThis necessity translates into substantial financial pressure and challenges in content creationWhen facing the dual pressures of shrinking advertising revenues and high production costs, these platforms find themselves compelled to pursue cost-cutting measures, thus leading to small-scale reductions in member privileges as an anticipatory response.

Reflecting on the trajectory of the long-video industry, we can observe a shift from a initially liberal "money-burning" free mode toward a progressively structured paid membership ecosystem, characterized by a tightening of restrictions over time