iQIYI’s Strategic Expansion into IP-Driven Experiences and Products: Capturing Value Through Vertical Integration

The global IP derivatives market is undergoing a transformative phase, driven by the confluence of digital innovation, consumer demand for immersive experiences, and strategic corporate maneuvers. In China, where the IP derivatives market is projected to reach RMB202.5 billion ($28.5 billion) in 2025—nearly doubling from RMB99.4 billion in 2020—companies like iQIYI are redefining value creation through vertical integration. By extending its reach from content production to physical and digital IP-based products, iQIYI is not only capturing a larger share of the value chain but also mitigating risks associated with fragmented market dynamics [1].

Vertical Integration: A Strategic Imperative

iQIYI’s approach to vertical integration is rooted in its ability to leverage its core strengths in content creation to build a cohesive ecosystem of IP-driven revenue streams. In the first half of 2025 alone, the company reported RMB100 million in gross merchandise value (GMV) from self-operated collectible trading cards and RMB200 million in GMV from merchandise collaborations, underscoring the commercial viability of its strategy [2]. These figures highlight a shift from traditional advertising and subscription models to diversified monetization, where IP becomes a currency across multiple touchpoints.

The company’s expansion into theme parks further exemplifies this strategy. By transforming hit shows into physical experiences, iQIYI is creating a feedback loop: immersive attractions deepen audience engagement, which in turn drives demand for ancillary products and services. This closed-loop model reduces dependency on third-party partners and enhances profit margins, a critical advantage in a market where IP licensing often involves complex negotiations and revenue-sharing agreements [3].

Market Dynamics and Policy Tailwinds

China’s IP derivatives market is growing at a compound annual growth rate (CAGR) of 12% from 2024 to 2031, outpacing the global average of 10.5% [1]. This acceleration is fueled by government initiatives to strengthen IP protection and promote cultural industries as a pillar of economic growth. For instance, policies encouraging the commercialization of intellectual property have reduced barriers for companies seeking to monetize their assets, creating a fertile ground for iQIYI’s expansion [4].

However, the broader economic context introduces complexities. While China’s Q2 2025 GDP growth of 5.2% exceeded expectations, deflationary pressures and a struggling property sector have dampened consumer confidence [5]. In such an environment, iQIYI’s vertical integration strategy becomes a buffer. By controlling the entire value chain—from content development to retail distribution—the company can optimize costs, respond swiftly to market shifts, and maintain pricing power even in a subdued economic climate.

Risks and Opportunities

Despite its strengths, iQIYI’s strategy is not without risks. The IP derivatives market is highly competitive, with rivals like Tencent and Alibaba leveraging their own content libraries and e-commerce platforms. Additionally, the success of IP-driven experiences hinges on the sustained popularity of specific characters or narratives, which can be volatile. A misstep in content curation or execution could erode consumer trust and brand equity.

Yet, the potential rewards are substantial. The Asia-Pacific region, including China, accounts for 23% of the global IP derivatives market in 2024, with a CAGR of 12.5% through 2031 [1]. For iQIYI, this represents a long-term opportunity to scale its IP ecosystem beyond China, particularly as cross-border collaborations and digital platforms lower entry barriers for global audiences.

Conclusion

iQIYI’s strategic pivot toward vertical integration in the IP derivatives market is a masterclass in value capture. By aligning its content, technology, and retail capabilities, the company is not only capitalizing on a high-growth sector but also insulating itself from external shocks. As the market evolves, the ability to create seamless, multi-layered IP experiences will become a key differentiator. For investors, iQIYI’s trajectory offers a compelling case study in how strategic foresight and operational agility can unlock value in an increasingly fragmented world.

Source:
[1] IP Derivatives Market Report 2025 (Global Edition), [https://www.cognitivemarketresearch.com/ip-derivatives-market-report]
[2] iQIYI Expands IP Business to Theme Parks, Hits $28.1M, [https://www.stocktitan.net/news/IQ/i-qiyi-unlocks-new-growth-beyond-the-screen-turning-hit-shows-into-u3pyrbn09q16.html]
[3] China Economic Update Report, Q2 2025, [https://arc-group.com/report/china-economic-update-report-q2-2025/]
[4] China’s IP finance push reaches new heights but hits patent transaction data stumbling block, [https://ipfray.com/chinas-ip-finance-push-reaches-new-heights-but-hits-patent-transaction-data-stumbling-block/]