iQIYI's Strategic Pivot: Theme Parks and E-Commerce Fuel a New Era of Growth

In an era where streaming giants face relentless pressure to sustain growth, iQIYI (IQ) has unveiled a bold strategy to combat declining subscription revenues: leveraging its IP library and cutting-edge technology to expand into e-commerce and immersive theme parks. With its first theme park, iQIYI LAND, set to open in Yangzhou by year-end and a second in Kaifeng in 2026, the company is positioning itself at the forefront of China's cultural tourism boom. This shift not only addresses subscription headwinds but also opens pathways to long-term margin expansion—a critical move as content costs and ad revenue volatility loom large.

The Subscription Crossroads: A Temporary Dip or Structural Challenge?

iQIYI's Q1 2025 results revealed a 9% year-over-year revenue decline to RMB7.19 billion, with membership services revenue down 8% to RMB4.40 billion. While this reflects a lighter content slate compared to 2024, the sequential 7% rise in membership revenue from Q4 2024 highlights the power of high-quality content. The company's focus on micro-dramas and long-form series, such as Strange Tales of the Tang Dynasty, has driven engagement, but sustaining this momentum requires more than episodic hits.

The Theme Park Play: A High-Stakes, High-Reward Move

The cornerstone of iQIYI's diversification is its entry into the theme park sector. The Yangzhou park, grounded in March 2025, will feature holographic theaters, mixed-reality experiences, and IP-driven attractions tied to its library. Meanwhile, Kaifeng's park, breaking ground in April, targets central China's tourism hubs. These ventures are strategically aligned with government-backed initiatives like the Grand Canal Cultural Belt, ensuring geographic relevance and policy support.

The theme park sector's growth is staggering: China's industry is projected to nearly double from RMB60 billion (USD$8.2B) in 2023 to over RMB110 billion (USD$15B) by 2028. By capitalizing on this trend, iQIYI is monetizing its IPs through admissions, themed merchandise, and partnerships—creating a physical extension of its digital ecosystem. Initial data is promising: its existing immersive theaters saw a 206% surge in visitors during the 2025 Lunar New Year, correlating with a 15% increase in related content viewing time.

E-Commerce: Scaling Beyond Screens

iQIYI's e-commerce ambitions are intertwined with its content strategy. Micro-dramas, which average under RMB1 million in production costs, now generate over RMB1 million in weekly revenue sharing—a testament to their cost efficiency and advertiser appeal. Brands are flocking to sponsor themed park experiences, from branded merchandise to in-park dining, creating a virtuous cycle where content drives foot traffic and vice versa.

AI-powered tools like the "I Jump" highlight navigator and Taodou World virtual characters further enhance engagement, pushing users toward extended viewing and commerce. With a $350 million convertible notes offering in early 2025 reducing debt pressure, iQIYI is financially fortified to scale these initiatives.

Navigating the Risks, Seizing the Upside

The path is not without hurdles. Theme parks are capital-intensive, and rising content costs (up 10% sequentially to RMB3.8 billion) have compressed margins to 5% in Q1 2025 from 12% a year earlier. Yet, the company's 12 consecutive quarters of positive operating cash flow (RMB339 million in Q1) and a net margin of 2.62% demonstrate fiscal discipline.

Critics may question execution risks, but iQIYI's agile IP management—updating content monthly for its parks—minimizes the risk of IP depreciation seen in traditional theme parks. With government support and a first-mover advantage in tech-driven experiences, the company is well-positioned to dominate this space.

Why Invest Now?

iQIYI's pivot is a calculated response to market saturation in streaming. By monetizing its IPs across physical and digital realms, it's creating a “total entertainment ecosystem” that transcends subscription dependency. The stock, trading at a 30% discount to its 2023 high, offers a compelling entry point as theme parks begin contributing revenue in 2025–2026.

The company's focus on high-margin e-commerce and low-infrastructure theme park models—aided by AI and VR—could stabilize margins and unlock undervalued IP assets. With China's cultural tourism sector booming and iQIYI's balance sheet strengthening, this is a rare opportunity to invest in a tech-driven play with both short-term catalysts and long-term growth potential.

Act now: iQIYI's strategic shift is a game-changer. The time to capitalize on its next-gen entertainment ecosystem is now.