愛奇藝iQIYI, Inc. (IQ) 2020年20-F年度報告「NASDAQ」.pdf

《愛奇藝iQIYI, Inc. (IQ) 2020年20-F年度報告「NASDAQ」.pdf》由會員分享，可在線閱讀，更多相關《愛奇藝iQIYI, Inc. (IQ) 2020年20-F年度報告「NASDAQ」.pdf（407頁珍藏版）》請在三個皮匠報告上搜索。

1、 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON,D.C.20549 FORM 20-F(Mark One)REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)OR 12(g)OF THE SECURITIES EXCHANGE ACT OF 1934 OR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended De

2、cember 31,2020.OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 OR SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934 Date of event requiring this shell company report.For the transition period from to Commission file

3、number:001-38431 iQIYI,Inc.(Exact name of Registrant as specified in its charter)N/A(Translation of Registrants name into English)Cayman Islands(Jurisdiction of incorporation or organization)9/F,iQIYI Innovation Building No.2 Haidian North First Street,Haidian District Beijing 100080,Peoples Republi

4、c of China(Address of principal executive offices)Xiaodong Wang,Chief Financial Officer E-mail: 9/F,iQIYI Innovation Building No.2 Haidian North First Street,Haidian District Beijing 100080,Peoples Republic of China Telephone:+86 10-6267-7171(Name,Telephone,E-mail and/or Facsimile number and Address

5、 of Company Contact Person)Securities registered or to be registered pursuant to Section 12(b)of the Act:Title of each class Trading Symbol(s)Name of each exchange on which registered American Depositary Shares,each representing seven Class A ordinary shares par value US$0.00001 per share IQ The Nas

6、daq Stock Market LLC(The Nasdaq Global Select Market)Class A ordinary shares,par value US$0.00001 per share*The Nasdaq Stock Market LLC(The Nasdaq Global Select Market)(1)*Not for trading,but only in connection with the listing on The Nasdaq Global Select Market of our American depositary shares,eac

7、h representing seven Class A ordinary shares.Securities registered or to be registered pursuant to Section 12(g)of the Act:None(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d)of the Act:None(Title of Class)Indicate the number of outstanding shares of eac

8、h of the issuers classes of capital or common stock as of the close of the period covered by the annual report.As of December 31,2020,there were 5,486,200,941 ordinary shares outstanding,being the sum of 2,609,809,545 Class A ordinary shares(excluding 275,829,374 Class A ordinary shares issued to ou

9、r depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercise or vesting of awards under our share incentive plans and 14,880,762 unvested restricted shares issued to certain employees)and 2,876,391,396 Class B ordinary shares.Indicate by check mark if the registrant is

10、 a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes No If this report is an annual or transition report,indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934.Yes No Note Checking the b

11、ox above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934 from their obligations under those Sections.Indicate by check mark whether the registrant:(1)has filed all reports required to be filed by Section 13 or 15(d)of the

12、 Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically

13、every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large acceler

14、ated filer,an accelerated filer,a non-accelerated filer,or an emerging growth company.See definition of“accelerated filer and large accelerated filer”and“emerging growth company”in Rule 12b-2 of the Exchange Act:Large accelerated filer Accelerated filer Non-accelerated filer Emerging growth company

15、If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)of th

16、e Exchange Act.The term“new or revised financial accounting standard”refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5,2012.Indicate by check mark whether the registrant has filed a report on and attestation to its manageme

17、nts assessment of the effectiveness of its internal control over financial reporting under Section 404(b)of the Sarbanes-Oxley Act(15 U.S.C.7262(b)by the registered public accounting firm that prepared or issued its audit report.Indicate by check mark which basis of accounting the registrant has bee

18、n to prepare the financial statements included in this filing:U.S.GAAP International Financial Reporting Standards as issued Other by the International Accounting Standards Board If“other”has been checked in response to the previous question,indicate by check mark which financial statement item the

19、registrant has elected to follow.Item 17 Item 18 If this is an annual report,indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes No(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by chec

20、k mark whether the registrant has filed all documents and reports required to be filed by Sections 12,13 or 15(d)of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.Yes No i TABLE OF CONTENTS INTRODUCTION 1 FORWARD-LOOKING INFORMATION

21、 2 PART I ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS 3 ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE 3 ITEM 3.KEY INFORMATION 3 ITEM 4.INFORMATION ON THE COMPANY 44 ITEM 4.A.UNRESOLVED STAFF COMMENTS 70 ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS 70 ITEM 6.DIRECTORS,SENIOR

22、MANAGEMENT AND EMPLOYEES 90 ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 99 ITEM 8.FINANCIAL INFORMATION 102 ITEM 9.THE OFFER AND LISTING 103 ITEM 10.ADDITIONAL INFORMATION 104 ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 116 ITEM 12.DESCRIPTION OF SECURITIES OTHER

23、THAN EQUITY SECURITIES 117 PART II ITEM 13.DEFAULTS,DIVIDEND ARREARAGES AND DELINQUENCIES 119 ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 119 ITEM 15.CONTROLS AND PROCEDURES 119 ITEM 16.A.AUDIT COMMITTEE FINANCIAL EXPERT 120 ITEM 16.B.CODE OF ETHICS 120 ITEM

24、16.C.PRINCIPAL ACCOUNTANT FEES AND SERVICES 120 ITEM 16.D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 121 ITEM 16.E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 121 ITEM 16.F.CHANGE IN REGISTRANTS CERTIFYING ACCOUNTANT 121 ITEM 16.G.CORPORATE GOVERNANCE 121 I

25、TEM 16.H.MINE SAFETY DISCLOSURE 121 PART III ITEM 17.FINANCIAL STATEMENTS 122 ITEM 18.FINANCIAL STATEMENTS 122 ITEM 19.EXHIBITS 123 Table of Contents 1 INTRODUCTION Unless otherwise indicated and except where the context otherwise requires,references in this annual report to:“ADSs”refers to our Amer

26、ican depositary shares,each of which represents seven Class A ordinary shares;“AI”refers to artificial intelligence;“Baidu”refers to Baidu,Inc.,our parent company and controlling shareholder;“China”or“PRC”refers to the Peoples Republic of China,excluding,for the purpose of this annual report only,Ta

27、iwan,Hong Kong,and Macau;“IP”refers to intellectual property;“IT”refers to information technology;“mobile DAUs,”for our iQIYI platform,refers to the number of unique mobile devices that have accessed our platform through our iQIYI mobile app at least once during a day.Our mobile DAUs are calculated

28、using internal company data that has not been independently verified,and we treat each distinguishable device as a separate user for purposes of calculating mobile DAUs,although it is possible that some people may use more than one mobile device and multiple people may share one mobile device to acc

29、ess our platform;“mobile MAUs,”for our iQIYI platform,refers to the number of unique mobile devices that have accessed our platform through our iQIYI mobile app at least once during a month.Our mobile MAUs are calculated using internal company data that has not been independently verified,and we tre

30、at each distinguishable device as a separate user for purposes of calculating mobile MAUs,although it is possible that some people may use more than one mobile device and multiple people may share one mobile device to access our platform;“RMB”and“Renminbi”refer to the legal currency of China;“shares

31、”or“ordinary shares”refers to our Class A and Class B ordinary shares,par value$0.00001 per share;“subscribing members,”refers to the individuals who purchased our monthly,quarterly or annual membership packages,including individuals with trial membership,and excluding individuals who pay for video

32、on-demand services or stand-alone packages for sports paid content,online literature or online games;subscribing members are calculated using the number of unique iQIYI user accounts that have subscribed for the relevant services;“U.S.GAAP”refers to generally accepted accounting principles in the Un

33、ited States;“US$,”“U.S.dollars,”“$,”and“dollars”refer to the legal currency of the United States;“video views”refers to the number of times a video is launched on our platform,regardless of time spent viewing the video;“WAP”refers to wireless application protocol;and “we,”“us,”“our company”and“our”r

34、efer to iQIYI,Inc.,a Cayman Islands company,and its subsidiaries,and,in the context of describing our operations and combined and consolidated financial information,also include its consolidated affiliated entities in the PRC.We present our financial results in RMB.We make no representation that any

35、 RMB or U.S.dollar amounts could have been,or could be,converted into U.S.dollars or RMB,as the case may be,at any particular rate,or at all.The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and thro

36、ugh restrictions on foreign trade.This annual report contains translations of certain foreign currency amounts into U.S.dollars for the convenience of the reader.Unless otherwise stated,all translations of Renminbi into U.S.dollars were made at the rate at RMB6.5250 to US$1.00,the exchange rate as s

37、et forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System in effect as of December 31,2020.Table of Contents 2 FORWARD-LOOKING INFORMATION This annual report contains forward-looking statements that involve risks and uncertainties.These statements involve known

38、 and unknown risks,uncertainties and other factors that may cause our actual results,performance or achievements to be materially different from those expressed or implied by the forward-looking statements.These statements are made under the“safe harbor”provisions of the U.S.Private Securities Litig

39、ations Reform Act of 1995.You can identify these forward-looking statements by words or phrases such as“may,”“will,”“expect,”“anticipate,”“aim,”“estimate,”“intend,”“plan,”“believe,”“likely to”or other similar expressions.We have based these forward-looking statements largely on our current expectati

40、ons and projections about future events and financial trends that we believe may affect our financial condition,results of operations,business strategy and financial needs.These forward-looking statements include,but are not limited to,statements about:our goals and strategies;our ability to retain

41、and increase the number of users,members and advertising customers,and expand our service offerings;our future business development,financial condition and results of operations;expected changes in our revenues,costs or expenditures;competition in our industry;relevant government policies and regula

42、tions relating to our industry;general economic and business conditions globally and in China;and assumptions underlying or related to any of the foregoing.You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual report com

43、pletely and with the understanding that our actual future results may be materially different from what we expect.Other sections of this annual report discuss factors which could adversely impact our business and financial performance.Moreover,we operate in an evolving environment.New risk factors e

44、merge from time to time and it is not possible for our management to predict all risk factors,nor can we assess the impact of all factors on our business or the extent to which any factor,or combination of factors,may cause actual results to differ materially from those contained in any forward-look

45、ing statements.We qualify all of our forward-looking statements by these cautionary statements.You should not rely upon forward-looking statements as predictions of future events.The forward-looking statements made in this annual report relate only to events or information as of the date on which th

46、e statements are made in this annual report.Except as required by law,we undertake no obligation to update or revise publicly any forward-looking statements,whether as a result of new information,future events or otherwise,after the date on which the statements are made or to reflect the occurrence

47、of unanticipated events.Table of Contents 3 PART I.ITEM 1.IDENTITY OF DIRECTORS,SENIOR MANAGEMENT AND ADVISERS Not applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable.ITEM 3.KEY INFORMATION A.Selected Financial Data Selected Consolidated Financial Data The following selected con

48、solidated statements of comprehensive loss data for the years ended December 31,2018,2019 and 2020,selected consolidated balance sheet data as of December 31,2019 and 2020 and selected consolidated cash flows data for the years ended December 31,2018,2019 and 2020 have been derived from our audited

49、consolidated financial statements included in this annual report beginning on page F-1.The following selected consolidated statements of comprehensive loss data for the years ended December 31,2016 and 2017,selected consolidated balance sheet data as of December 31,2016,2017 and 2018 and selected co

50、nsolidated cash flows data for the years ended December 31,2016 and 2017 have been derived from our audited consolidated financial statements not included in this annual report.Our historical results for any period are not necessarily indicative of results to be expected for any future period.The se

51、lected consolidated financial data should be read in conjunction with,and are qualified in their entirety by reference to,our audited consolidated financial statements and related notes and“Item 5.Operating and Financial Review and Prospects”below.Our consolidated financial statements are prepared a

52、nd presented in accordance with U.S.GAAP.Starting from January 1,2018,we adopted a new revenue accounting standard ASC topic 606,Revenue from Contracts with Customers(“ASC 606”),which reclassifies value added taxes(“VAT”)from cost of revenues to net against revenues among other changes.The consolida

53、ted statements of comprehensive loss data for the years ended December 31,2018,2019 and 2020 presented below have been prepared in accordance with ASC 606,while the consolidated statements of comprehensive loss data for the years ended December 31,2016 and 2017 presented below have been prepared in

54、accordance with the legacy revenue accounting standard ASC topic 605,Revenue Recognition(“ASC 605”).Table of Contents 4 For the year ended December 31,2016(1)2017(1)2018 2019 2020 RMB RMB RMB RMB RMB US$(in thousands,except for share and per share data)Selected Consolidated Statements of Comprehensi

55、ve Loss Data:Total revenues 11,237,407 17,378,350 24,989,116 28,993,658 29,707,215 4,552,830 Operating costs and expenses Cost of revenues(3)(11,436,595)(17,386,563)(27,132,811)(30,348,342)(27,884,395)(4,273,470)Selling,general and administrative(3)(1,765,824)(2,674,990)(4,167,889)(5,236,007)(5,187,

56、835)(795,070)Research and development(3)(824,482)(1,269,806)(1,994,652)(2,667,146)(2,675,494)(410,037)Total operating costs and expenses (14,026,901)(21,331,359)(33,295,352)(38,251,495)(35,747,724)(5,478,577)Operating loss (2,789,494)(3,953,009)(8,306,236)(9,257,837)(6,040,509)(925,747)Total other(e

57、xpenses)/income,net (271,440)208,512 (676,194)(967,050)(943,368)(144,578)Loss before income taxes (3,060,934)(3,744,497)(8,982,430)(10,224,887)(6,983,877)(1,070,325)Income tax(expense)/benefit (13,088)7,565 (78,801)(51,852)(23,276)(3,567)Net loss (3,074,022)(3,736,932)(9,061,231)(10,276,739)(7,007,1

58、53)(1,073,892)Less:Net income attributed to non-controlling interests 48,545 46,590 31,208 4,783 Accretion of redeemable convertible preferred shares (4,874,739)5,073,140 (298,990)Accretion of redeemable noncontrolling interests (1,542)(7,087)(1,086)Extinguishment and reissuance of Series B preferre

59、d shares (363,279)Net(loss)/income attributable to ordinary shareholders (7,948,761)972,929 (9,408,766)(10,324,871)(7,045,448)(1,079,761)Net(loss)/earnings per ordinary share:Basic (23.20)0.30 Diluted (23.20)(1.15)Net loss per Class A and Class B ordinary share(2):Basic (2.43)(2.02)(1.36)(0.21)Dilut

60、ed (2.43)(2.02)(1.36)(0.21)Net loss per ADS:Basic (17.01)(14.14)(9.52)(1.47)Diluted (17.01)(14.14)(9.52)(1.47)Shares used in net(loss)/earnings per ordinary share computation Basic 342,548,237 342,548,237 Diluted 342,548,237 3,243,147,261 Shares used in net loss per Class A and Class B ordinary shar

61、e computation Basic 3,867,931,786 5,104,882,400 5,176,180,057 5,176,180,057 Diluted 3,867,931,786 5,104,882,400 5,176,180,057 5,176,180,057 (1)In accordance with the legacy revenue accounting standard(ASC 605),VAT is presented in cost of revenues rather than net against revenues.(2)Our ordinary shar

62、es are comprised of Class A ordinary shares and Class B ordinary shares.Each holder of Class A ordinary shares is entitled to one vote per share and each holder of Class B ordinary shares is entitled to ten votes per share on all matters submitted to them for a vote.Class B ordinary shares are conve

63、rtible at any time by the holder thereof into Class A ordinary shares on a one-for-one basis.As holders of Class A and Class B ordinary shares have the same dividend right and the same participation right in our undistributed earnings,the basic and diluted loss per Class A ordinary share and Class B

64、 ordinary share are the same for all the periods presented during which there were two classes of ordinary shares.Table of Contents 5(3)Share-based compensation expenses were allocated in operating costs and expenses as follows:For the year ended December 31,2016 2017 2018 2019 2020 RMB RMB RMB RMB

65、RMB US$(in thousands)Selected Consolidated Statements of Comprehensive Loss Data:Cost of revenues 9,479 34,895 83,351 171,053 201,970 30,953 Selling,general and administrative 30,447 130,994 368,598 675,278 851,416 130,485 Research and development 22,466 67,535 104,262 238,189 316,709 48,538 Total 6

66、2,392 233,424 556,211 1,084,520 1,370,095 209,976 As of December 31,2016 2017 2018 2019 2020 RMB RMB RMB RMB RMB US$(in thousands)Selected Consolidated Balance Sheet Data:Cash and cash equivalents 964,207 733,010 4,586,405 5,934,742 10,915,282 1,672,840 Restricted cash 2,174,042 974,932 25,230 3,867

67、 Short-term investments 902,978 779,916 6,061,832 4,579,313 3,358,174 514,663 Total current assets 5,154,305 5,700,528 19,853,443 20,272,838 22,290,424 3,416,158 Total assets(1)13,631,636 20,200,899 44,759,698 44,792,550 48,185,429 7,384,740 Total current liabilities(1)11,889,853 11,625,612 19,812,3

68、56 20,173,166 24,854,578 3,809,131 Total liabilities(1)11,897,142 11,918,299 26,604,135 35,077,618 38,741,131 5,937,338 Total mezzanine equity 17,039,167 22,601,664 101,542 108,629 16,648 Total shareholders(deficit)/equity (15,304,673)(14,319,064)18,155,563 9,613,390 9,335,669 1,430,754 Note:(1)We a

69、dopted Accounting Standards Update(“ASU”)No.2016-02:Leases on January 1,2019 using the modified retrospective transition method.Right-of-use assets(“ROU assets”)and lease liabilities(including current and non-current)for operating leases are presented on the face of the consolidated balance sheets a

70、s of December 31,2019 and 2020,while the consolidated balance sheets data as of December 31,2016,2017 and 2018 have been prepared in accordance with ASC topic 840,Accounting for Leases(“ASC 840”).For further information,see Note 13 to our consolidated financial statements included elsewhere in this

71、annual report.We adopted ASU 2019-02,Improvements to Accounting for Costs of Films and License Agreements for Program Materials(“ASU 2019-02”)on January 1,2020,using a prospective transition method,which includes the following major changes from previous legacy GAAP that are applicable to us:The con

72、tent distinction for capitalization of production costs of an episodic television series and production costs of films is removed;We are required to test films and license agreements for program material for impairment at a film group level when the film or license agreements are predominantly monet

73、ized with other films and license agreements;We shall assess estimates of the use of a film in a film group and account for such changes prospectively;Cash outflows for the costs incurred to obtain rights for both produced and licensed content are required to be reported as operating cash outflows i

74、n the statement of cash flows.Table of Contents 6 For further information,see Notes 2,8 and 10 to our consolidated financial statements included elsewhere in this annual report.The following table presents our selected consolidated cash flows data for the years indicated.For the year ended December

75、31,2016 2017 2018 2019 2020 RMB RMB RMB RMB RMB US$(in thousands)Selected Consolidated Cash Flows Data:Net cash provided by/(used for)operating activities 2,612,121 4,011,784 2,884,186 3,906,227 (5,411,071)(829,283)Net cash(used for)/provided by investing activities (6,663,100)(10,660,674)(20,949,09

76、4)(11,749,571)159,296 24,412 Net cash provided by financing activities 3,411,766 6,561,110 23,474,959 7,880,306 9,373,906 1,436,615 Effect of exchange rate changes on cash,cash equivalents and restricted cash 14,681 (143,417)617,386 112,265 (91,293)(13,991)Net(decrease)/increase in cash,cash equival

77、ents and restricted cash (624,532)(231,197)6,027,437 149,227 4,030,838 617,753 Cash,cash equivalents and restricted cash at the beginning of the year 1,588,739 964,207 733,010 6,760,447 6,909,674 1,058,954 Cash,cash equivalents and restricted cash at the end of the year 964,207 733,010 6,760,447 6,9

78、09,674 10,940,512 1,676,707 B.Capitalization and Indebtedness Not Applicable.C.Reasons for the Offer and Use of Proceeds Not Applicable.D.Risk Factors Risks Related to Our Business and Industry We have incurred net losses since our inception and may continue to incur losses in the future.We incurred

79、 net losses since our inception,including net losses in the amount of RMB9.1 billion,RMB10.3 billion and RMB7.0 billion(US$1.1 billion)in 2018,2019 and 2020,respectively,primarily due to significant content and bandwidth costs.Our ability to achieve profitability is affected by various factors,many

80、of which are beyond our control.For example,our revenues depend on the increased number of subscribing members and advertising customers allocation of more budget to internet video streaming platforms.In addition,our users willingness to pay and subscribe to our content depends on the quality and br

81、eadth of our content offerings and availability of alternative entertainment content offerings.The production and procurement of content,as well as bandwidth,have historically accounted for the majority of our cost of revenues.We expect our cost to increase as we are committed to producing and acqui

82、ring more high-quality and popular content to enrich user experience and to support our overseas expansion in order to achieve long-term success.Producing high-quality,popular original content is costly and time-consuming and it will typically take a long period of time to realize returns on investm

83、ent,if at all.The market prices for professionally-produced content,especially popular TV series and movies,have increased significantly in China during the past few years.Although we have observed improving efficiency of content investment primarily as a result of better supply/demand dynamic and o

84、ptimized cost structure,we expect our content production cost on a per-episode basis to exhibit moderate growth as compared to previous years.In 2018,2019 and 2020,we incurred RMB27.1 billion,RMB30.3 billion and RMB27.9 billion(US$4.3 billion)in cost of revenues.If we cannot successfully realize sat

85、isfactory returns on our content investment and generate sufficient revenues,our financial condition and results of operations may be materially and adversely affected.We may continue to incur net losses in the foreseeable future due to our continued investments in content and technology.We may also

86、 continue to incur net losses in the foreseeable future due to changes in the macroeconomic and regulatory environment,competitive dynamics and our inability to respond to these changes in a timely and effective manner.It is not possible for us to accurately predict when we will be able to achieve p

87、rofitability.Table of Contents 7 If we fail to anticipate user preferences and provide high-quality content,especially popular original content,in a cost-effective manner,we may not be able to attract and retain users to remain competitive.Our success depends on our ability to maintain and grow user

88、 time spent on our platform.To attract and retain users and compete against our competitors,we must continue to offer high-quality content,especially popular original content,in a cost-effective manner,which provides our users with a superior online entertainment experience.To this end,we must conti

89、nue to produce new original content and source new professionally produced or other video content in a cost-effective manner.Given that we operate in a rapidly evolving industry,we need to anticipate user preferences and industry changes and respond to such changes in a timely and effective manner.I

90、f we fail to cater to the needs and preferences of our users,control our costs in doing so or fail to deliver superior user experience,we may suffer from reduced user traffic,and our business,financial condition and results of operations may be materially and adversely affected.Various phases of our

91、 original content production are outsourced to our content production partners.If they fail to generate quality content satisfactory to our demands or provide services upon terms commercially acceptable to us,we may be unable to provide high-quality original content offerings to our users.We rely on

92、 our in-house team to generate creative ideas for original content and to supervise the original content origination and production process,and we intend to continue to invest resources in content production.We face fierce competition for qualified personnel in a limited pool of high-quality creativ

93、e talent.Our competitors include well-capitalized companies that are capable of offering compensation packages more attractive to talents.If we are not able to compete effectively for talents or attract and retain top talents at reasonable costs,our original content production capabilities would be

94、negatively impacted.Any deterioration in our in-house content production capability,inability to attract creative talents at reasonable costs or losses in personnel may materially and adversely affect our business and operating results.If we are unable to offer popular original content that meets us

95、er tastes and preferences in a cost-effective manner,our user experience may be adversely affected,we may suffer from reduced user traffic and our business,financial condition and results of operations may be materially and adversely affected.If we fail to procure content from content providers upon

96、 terms acceptable to us,our business may be materially and adversely affected.Our ability to provide our users with high-quality,popular content depends in part on our ability to procure content from studios and other content providers,as well as distributors and other licensors of content.We typica

97、lly enter into license and sub-license agreements with third-party content providers and other IP holders.The license periods and the terms and conditions of such licenses vary.If content providers and other rights holders are no longer willing or able to license content to us upon terms acceptable

98、to us,or,in the case where we obtained the right to distribute content through sub-license agreements,if the licensors lose their right to sub-license such content to us,our ability to offer content to our users will be adversely affected and/or our cost could further increase.For content sub-licens

99、ed and currently being showcased on our platform,we may be forced to remove such content as a result of our licensors disputes with the original content provider,which may result in loss of user traffic and revenues.If we fail to remove such content in a timely manner,we may become the subject of ad

100、verse legal actions from the original content provider.As competition intensifies,we may see the cost of licensed content increase.As we seek to differentiate our service,we are increasingly focused on securing rights other than merely distribution and online streaming rights.We also acquire other f

101、orms of copyright such as rights to adapt the original content into online games,films,drama series,animation and other entertainment formats.We focus on offering an overall mix of content that appeals to our users in a cost-efficient manner.If we do not maintain a compelling mix of content,our user

102、 acquisition and retention may be adversely affected.If our efforts to retain members and attract new members are not successful,our business and results of operations will be materially and adversely affected.We have experienced significant membership growth in general over the past several years.O

103、ur ability to continue to retain members and attract new members will depend in part on our ability to consistently provide our members with compelling content choices,as well as a quality experience for selecting and viewing video content.Furthermore,the relative service levels,content offerings,pr

104、icing and related features of competitors may adversely impact our ability to attract and retain members.If we introduce new or adjust existing features,adjust pricing or service offerings,or change the mix of content in a manner that is not favorably received by our members,we may not be able to at

105、tract and retain members.Many of our members originate from organic growth.If our efforts to satisfy our existing members are not successful,we may not be able to attract new members,and as a result,our ability to maintain and/or grow our membership revenues will be adversely affected.Members may ca

106、ncel or decide not to renew our service for many reasons,including a perception that they do not use the service sufficiently,payment inconveniences,the need to cut household expenses,availability of content is unsatisfactory,competitive services provide a better value or experience and customer ser

107、vice issues are not satisfactorily resolved.We are also exploring various opportunities and marketing strategies to better monetize our membership base,including offering early access privilege to certain drama series for an additional fee.Such initiatives may not be well received by our members and

108、 may have a negative impact on our reputation and results of operations.We must retain existing members and continually attract new members to increase our membership base.If we are unable to successfully compete with current Table of Contents 8 and new competitors in both retaining our existing mem

109、bers and attracting new members,our business will be adversely affected.Further,if an excessive number of members cancel or opt not to renew our service,we may be required to incur significantly higher marketing expenditures to attract new members than we currently anticipate.In addition,due to the

110、intensified regulatory oversight on content supervision in 2019 and the uncertainty of certain content launch scheduling in the early stage of the COVID-19 pandemic in the first quarter of 2020,we have experienced delays and reschedules for certain new content offerings,which disturbed our content l

111、aunch plans and imposed unfavorable impact on our advertising services,and our operating results were negatively affected.If the regulatory or administrative authorities impose new requirements relating to,among other things,content supervision and approval,we may not be able to offer a variety of c

112、ontent offerings in time,or at all,and we cannot assure you that we will continue to maintain our membership base in the future.If we fail to retain existing or attract new advertising customers to advertise on our platform,maintain and increase our wallet share of advertising budget or if we are un

113、able to collect accounts receivable in a timely manner,our financial condition and results of operations may be materially and adversely affected.We generated a substantial part of our revenues from online advertising.Although online advertising revenue as a percentage of our total revenues has decr

114、eased recently,online advertising remains one of our largest sources of revenue.We cannot assure you that we will be able to retain our advertising customers in the future,attract new advertising customers continuously or be able to retain our advertising customers at all.If our advertising customer

115、s find that they can generate better returns elsewhere,or if our competitors provide better online advertising services to suit our advertising customers goals,we may lose our advertising customers.We experienced a decline in our online advertising revenue between 2019 and 2020,which saw such revenu

116、e decrease by 17.5%.This is compared to a decline in our online advertising revenue by 11.3%between 2018 and 2019.In addition,third parties may develop and use certain technologies to block the display,and our members are able to skip the viewing,of our advertising customers advertisements on our pl

117、atform,which may in turn cause us to lose advertising customers and adversely affect our results of operations.If our advertising customers determine that their expenditures on internet video streaming platforms do not generate expected returns,they may allocate a portion or all of their advertising

118、 budgets to other advertising channels such as television,newspapers and magazines or other internet channels such as search engines,news aggregation platforms,short-form video platforms,e-commerce platforms and social media platforms,and reduce or discontinue business with us.Since most of our adve

119、rtising customers are not bound by long-term contracts,they may lessen or discontinue advertising arrangements with us easily without incurring material liabilities.Failure to retain existing advertising customers,or maintain their level of budget allocated to us,or attract new advertising customers

120、 to advertise on our platform may materially and adversely affect our financial conditions and results of operations.We may continue to experience deceleration in the growth or experience decline of our online advertising business,and we cannot assure you that we will be able to resume our historica

121、l growth in online advertising revenue.Our brand advertising customers typically enter into online advertising agreements with us through various third-party advertising agencies.In Chinas advertising industry,advertising agencies typically have good relationships and maintain longer periods of coop

122、eration with the brand advertising customers they represent.In addition to entering into advertising contracts directly with advertising customers,we also enter into advertising contracts with third-party advertising agencies,which represent advertising customers,even if we have direct contact with

123、such advertisers.As a result,we rely on third-party advertising agencies for sales to,and collection of payment from,our brand advertisers.In consideration for the third-party advertising agencies services,we offer them rebates based on the volume of business they bring to us.The financial soundness

124、 of our advertising customers and advertising agencies may affect our collection of accounts receivable.We make a credit assessment of our advertising customers and advertising agencies to evaluate the collectability of the advertising service fees before entering into an advertising contract.Howeve

125、r,we cannot assure you that we are or will be able to accurately assess the creditworthiness of each advertising customer or advertising agency,and any inability of advertising customers or advertising agencies to pay us in a timely manner may adversely affect our liquidity and cash flows.In additio

126、n,there has been some consolidation among Chinas advertising agencies.If this trend continues,a small number of large advertising agencies may be in a position to demand higher rebate for advertising agency services,which could reduce our online advertising revenue.In addition,we do not have long-te

127、rm cooperation agreements or exclusive arrangements with third-party advertising agencies and they may elect to direct business opportunities to other advertising service providers,including our competitors.If we fail to retain and enhance the business relationships with third-party advertising agen

128、cies,we may suffer from a loss of advertising customers and our financial condition and results of operations may be materially and adversely affected.Table of Contents 9 We operate in a capital intensive industry and require a significant amount of cash to fund our operations,content acquisitions a

129、nd technology investments.If we cannot obtain sufficient capital,our business,financial condition and prospects may be materially and adversely affected.The operation of an internet video streaming platform requires significant and continuous investment in content and technology.Producing high-quali

130、ty original content is costly and time-consuming and it will typically take a long period of time to realize returns on investment,if at all.To date,we have financed our operations primarily with net cash generated from operating activities,as well as financing activities such as placements of prefe

131、rred shares,convertible notes and asset-based securities,bank loans,the substantial financial support from Baidu,and the proceeds from our initial public offering and follow-on offering of our ADSs.As of December 31,2020,we had an outstanding loan balance of RMB700.0 million(US$107.3 million)to Baid

132、u.In order to implement our growth strategies,we will incur additional capital in the future to cover,among others,costs to produce and license content.We may need to obtain additional financing,including equity offerings or debt financing,to fund the operation and expansion of business.Our ability

133、to obtain additional financing in the future,however,is subject to a number of uncertainties,including those relating to:our future business development,financial condition and results of operations;general market conditions for financing activities by companies in our industry;macro-economic and ot

134、her conditions in China and elsewhere;and our relationship with Baidu.As a public company with a growing business,we expect to increasingly rely on net cash provided by operating activities,financing through capital markets and commercial banks for our liquidity needs.However,we cannot assure you th

135、at we will be successful in our efforts to further diversify our sources of liquidity and obtain financing.If we cannot obtain sufficient capital to meet our capital needs,we may not be able to execute our growth strategies and our business,financial condition and prospects may be materially and adv

136、ersely affected.We have been and may again be subject to legal proceedings,claims and investigations in the ordinary course of business.If the outcomes of these proceedings are adverse to us,it could have a material adverse effect on our business,results of operations and financial condition.We are

137、subject to various legal proceedings,claims and government investigations that have arisen in the ordinary course of business and have not yet been fully resolved.New legal proceedings,claims and investigations may arise in the future.The existence of litigation,claims,investigations and proceedings

138、 may harm our reputation,business and adversely affect the trading price of our ADSs.Starting in April 2020,we and certain of our current and former officers and directors were named as defendants in putative securities class actions filed in federal court,captioned Lee v.iQIYI,Inc.et al.,No.1:2020-

139、cv-0183(U.S.District Court for the Eastern District of New York,filed April 16,2020)(the“Lee Case”);Shiferaw v.iQIYI,Inc.et al.,No.1:2020-cv-03115(U.S.District Court for the Southern District of New York,filed April 17,2020)(the“Shiferaw Case”);Jenkins v.iQIYI,Inc.et al.,No.4:20-cv-02882(U.S.Distric

140、t Court for the Northern District of California,filed April 27,2020)(the“Jenkins Case”);and Le Rivage LLC v.iQIYI,Inc.et al.,No.1:20-cv-02653(U.S.District Court for the Eastern District of New York,filed June 15,2020)(the“Le Rivage Case”).All of these cases were purportedly brought on behalf of a cl

141、ass of persons who allegedly suffered damages as a result of alleged misstatements and omissions in the Companys public disclosure documents.On June 15,2020,the Shiferaw Case was voluntarily dismissed by plaintiffs.On July 6,2020,the court granted our motion to transfer the Jenkins Case to the U.S.D

142、istrict Court for the Eastern District of New York.The Lee Case,Jenkins Case,and Le Rivage Case remain in their preliminary stages.Regardless of the merit of particular claims,legal proceedings and investigations may result in reputational harm,be expensive,time consuming,disruptive to our operation

143、s and distracting to management.In the event we do not prevail or we enter into settlement arrangements in any of these proceedings or investigations,we may incur significant expenses which may materially adversely affect our results of operations.The SECs Division of Enforcement is seeking the prod

144、uction of certain financial and operating records dating from January 1,2018,as well as documents related to certain acquisitions and investments that were identified in the Wolfpack Report.We are cooperating with the SEC,and we cannot predict the duration,outcome,or impact of the SEC investigation.

145、Table of Contents 10 In addition,we are subject to legal proceedings in the ordinary course of business.We have been involved in litigation based on allegations of infringement of third-party copyright,including information network dissemination rights,and other rights,due to the content available o

146、n our platform.We have been subject to lawsuits in China for alleged unfair competition in connection with our platform.We may also face litigation or administrative actions for defamation,negligence,copyright and trademark infringement,or other purported injuries resulting from the content we provi

147、de or the nature of our services.We were subject to a total of 1,416 lawsuits in China for alleged copyright infringement between January 1,2018 and December 31,2020,in connection with our platform.Approximately 67.8%of the lawsuits filed from January 1,2018 through December 31,2020 in connection wi

148、th the iQIYI platform were rejected by relevant PRC courts,withdrawn by the plaintiffs or settled by the parties.As of December 31,2020,a total of 380 lawsuits against us in connection with our platform were pending,with the aggregate amount of damages sought under these pending cases being RMB269.1

149、 million(US$41.2 million).The outcome of legal proceedings and investigations is inherently uncertain.If one or more legal matters were resolved against us or an indemnified third party in a reporting period for amounts in excess of managements expectations,our financial condition and operating resu

150、lts for that reporting period could be materially adversely affected.Further,such an outcome could result in significant compensatory,punitive or trebled monetary damages,disgorgement of revenue or profits,remedial corporate measures or injunctive relief against us that could materially adversely af

151、fect our financial condition and operating results.The success of our business depends on our ability to maintain and enhance our brand.We believe that maintaining and enhancing our iQIYI brand is of significant importance to the success of our business.Our well-recognized brand is critical to incre

152、asing our user base and,in turn,expanding our membership base and attractiveness to advertising customers and content providers.Since the internet video industry is highly competitive,maintaining and enhancing our brand depends largely on our ability to remain the market leader in China,which may be

153、 difficult and expensive.To the extent our content,in particular,our original content,is perceived as low quality or otherwise not appealing to users,our ability to maintain and enhance our brand may be adversely impacted.Our overseas operations may not be successful and may be adversely affected by

154、 legal,regulatory,political and economic risks.We began to expand our overseas business operations in late 2019.We have launched our multilingual iQIYI app,which currently supports ten languages and can be downloaded globally from major iOS and Android app stores.We also cooperate with local partner

155、s to promote our app and expand our user base.We are subject to PRC law in addition to the laws of the foreign countries and regions in which we operate.If any of our overseas investments or operations violate such laws,we could become subject to sanctions or other penalties,which could negatively a

156、ffect our reputation,business and operating results.Our overseas expansion may not be successful and may expose us to a number of risks inherent in doing business internationally,including:difficulties with staffing and managing foreign operations,which may be exacerbated as a result of distance,tim

157、e zone,language and cultural differences;challenges in formulating effective local sales and marketing strategies targeting users from various jurisdictions and cultures,who have a diverse range of preferences and demands;challenges in identifying appropriate local business partners and establishing

158、 and maintaining good working relationships with them;challenges in producing and acquiring content that is appealing to local population and catering to local cultural environment,and screening out content that may be inappropriate,offensive or unwelcoming in certain countries or regions;challenges

159、 in recruiting quality local content creators to attract and engage local users;challenges in effectively managing overseas operations from our headquarters or new regional headquarters and establishing overseas IT systems and infrastructure;competitions from other participants in the market,includi

160、ng international leading companies;challenges in selecting suitable geographical regions for overseas expansion;currency exchange rate fluctuations and foreign exchange control risks;Table of Contents 11 exposure to changes in macroeconomic conditions in foreign jurisdictions;political or social unr

161、est or economic instability;difficulties and costs relating to compliance with applicable foreign laws and regulations and unexpected changes in laws or regulations;challenges in investing in countries and regions that restrict or may restrict foreign investment in the internet service provider,onli

162、ne video,entertainment,advertising or culture related industry,and unexpected changes in such restrictions;difficulties in and costs relating to the obtaining and keeping valid licenses,permits or other applicable governmental authorizations,content control from local authorities;complexity of intel

163、lectual property protection and enforcement regime overseas and the potential exposure of claims relating to intellectual property infringement;exposure to different tax jurisdictions that may subject us to greater fluctuations in our effective tax rate and potentially adverse tax consequences;expos

164、ure to different labor protection requirements and potential labor-related claims and disputes;and increased costs associated with doing business in foreign jurisdictions.One or more of these factors could harm our overseas operations and consequently,could harm our overall business,financial condit

165、ion and results of operations.In addition,the regulatory framework for online video content or other services we provide is still developing and remains uncertain in certain countries where we are exploring overseas operations.As we continue to expand our business overseas,we cannot assure you that

166、we will be able to fully comply with the legal requirements of each foreign jurisdiction and successfully adapt our business model to local market conditions.We may be the subject of detrimental conduct by third parties,including complaints to regulatory agencies and the public dissemination of mali

167、cious assessments of our business,which could have a negative impact on our reputation and cause us to lose market share,users,advertisers and revenues,and adversely affect the price of our ADSs.We have been,and in the future may be,the target of anti-competitive,harassing or other detrimental condu

168、ct by third parties.Such conduct may include complaints,anonymous or otherwise,to regulatory agencies regarding our operations,accounting,revenues,business relationships,business prospects and business ethics.Additionally,allegations and other negative publicity,directly or indirectly against us,may

169、 be posted online or otherwise generally disseminated by anyone,whether or not related to us.We may be subject to regulatory investigations,lawsuits or public perception backlash as a result of such third-party conduct and may be required to expend significant time and incur substantial costs to add

170、ress such third-party conduct,and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time,or at all.Our reputation may also be negatively affected as a result of the public dissemination of anonymous allegations or malicious statem

171、ents about our business,which in turn may cause us to lose market share,users,advertisers and revenues,and adversely affect the price of our ADSs.Increases in market price of professionally-produced content,or PPC,may have a material and adverse effect on our business,financial condition and results

172、 of operations.PPC constitutes a significant part of our content offerings.The market prices for PPC,especially TV series and movies,have increased significantly in China during the past few years.Due to the improving monetization prospects,internet video streaming platforms are generating more reve

173、nues and are competing aggressively to license popular content titles,which have in turn led to increases in licensing fees of PPC in general.As the market further grows,the expectations of copyright owners,distributors and industry participants may continue to rise,and as such they may demand highe

174、r licensing fees for PPC.Furthermore,with the expansion of our content library,we expect the costs for PPC to continue to increase.If we are unable to generate sufficient revenues to outpace the increase in market prices for PPC,we may incur more losses and our business,financial condition and resul

175、ts of operations may be adversely affected.Table of Contents 12 We operate in a highly competitive market and we may not be able to compete effectively.We face significant competition in China,primarily from Tencent Video and Youku.We compete for users,usage time and advertising customers.Some of ou

176、r competitors have a longer operating history and significantly greater financial resources than we do,and,in turn,may be able to attract and retain more users,usage time and advertising customers.Our competitors may compete with us in a variety of ways,including by obtaining IP rights to popular co

177、ntent,conducting brand promotions and other marketing activities,and making investments in and acquisitions of our business partners.In addition,certain internet video streaming platforms may continue to derive their revenues from providing content that infringes third-party copyright and may not mo

178、nitor their platforms for any such infringing content.As a result,we may be placed at a disadvantage to some of these companies that do not incur similar costs as we do with respect to content production,acquisition and monitoring.If any of our competitors achieves greater market acceptance than we

179、do or is able to offer more attractive internet video content,our user traffic and our market share may decrease,which may result in a loss of advertising customers and members,as well as have a material and adverse effect on our business,financial condition and results of operations.We face competi

180、tion from traditional media such as major TV stations,which also provide and may increase their internet and on-demand video offerings.Most large companies in China allocate,and will likely continue to allocate,a significant portion of their advertising budgets to traditional media,particularly majo

181、r TV stations.We also face increasing competition for users,user time and advertising budgets from other internet media and entertainment services,such as internet and social media platforms and short-form video platforms.The continued and collaborative efforts of our senior management and key emplo

182、yees are crucial to our success,and our business may be harmed if we lose their services.Our success depends on the continued and collaborative efforts of our senior management,especially our executive officers,including our founder,Dr.Yu Gong.If,however,one or more of our executives or other key pe

183、rsonnel are unable or unwilling to continue to provide services to us,we may not be able to find suitable replacements easily or at all.Competition for management and key personnel is intense and the pool of qualified candidates is limited.We may not be able to retain the services of our executives

184、or key personnel,or attract and retain experienced executives or key personnel in the future.If any of our executive officers or key employees joins a competitor or forms a competing business,we may lose crucial business secrets,technological know-how,advertisers and other valuable resources.Each of

185、 our executive officers and key employees has entered into an employment agreement with us,which contains non-compete provisions.However,we cannot assure you that they will abide by the employment agreements or our efforts to enforce these agreements will be effective enough to protect our interests

186、.The COVID-19 epidemic has had and could continue to have a material adverse impact on our business,operating results and financial condition.The COVID-19 pandemic has created unique global and industry-wide challenges,including challenges to many aspects of our business.Substantially all of our rev

187、enues and workforce are concentrated in China.The COVID-19 outbreak has impact on Chinas internet video industry in general.The extent to which COVID-19 impacts our financial position,results of operations and cash flows in 2021 will depend on the future developments of the outbreak,including new in

188、formation concerning the global severity of and actions taken to contain the outbreak,which are highly uncertain and unpredictable.In addition,our financial position,results of operations and cash flows could be adversely affected to the extent that the outbreak harms the Chinese economy in general.

189、In the first part of 2020,in response to the intensifying efforts to contain the spread of COVID-19,the Chinese government took a number of actions,which included extending the Chinese New Year holiday,quarantining individuals suspected of having COVID-19,asking residents in China to stay at home an

190、d to avoid public gathering,among other things.During the early part of 2020,COVID-19 caused temporary closure of many corporate offices and store fronts across China,and we experienced growth in the number of subscribing members driven by the increased entertainment demand during the pandemic as a

191、result.Subsequently,the number of subscribing members in the fourth quarter of 2020 decreased as compared with that in the second and the third quarter of 2020.Our member acquisition and engagement may fluctuate depending on factors beyond our control,and we cannot predict member acquisition and eng

192、agement levels as the situation of the pandemic changes.In addition,our online advertising services revenue decreased in 2020 as compared to 2019,due to the challenging macroeconomic environment in China.However,our online advertising services revenue has been rebounding since the second quarter of

193、2020.We cannot guarantee that such decrease will not occur again in the future.Table of Contents 13 During the first part of 2020,we took a series of measures in response to the outbreak,including,among others,remote working arrangements for our employees.We temporarily shut down some of our premise

194、s and facilities,following all legal directions and safety guidelines with respect to our premises and facilities in operation.These measures,if taken again in the future,could reduce the capacity and efficiency of our operations,which in turn could negatively affect our results of operations.Many o

195、f the quarantine measures within China have since been relaxed as of the date of this annual report.However,our results of operations may still be adversely affected to the extent that COVID-19 continues to affect the Chinese economy in general.In addition,the longer-term trajectory of COVID-19,both

196、 in terms of scope and intensity of the pandemic,in China,together with its impact on the industry and the broader economy are still difficult to assess or predict and face significant uncertainties that will be difficult to quantify.Relaxation of restrictions on economic and social activities may a

197、lso lead to new cases which may lead to re-imposed restrictions.If there is not a material recovery in the COVID-19 situation,or the situation further deteriorates in China,our business,results of operations and financial condition could be materially and adversely affected.We face risks related to

198、health epidemics and other outbreaks,as well as natural disasters,which could significantly disrupt our operations and adversely affect our business,financial condition or results of operation.In addition to the impact of COVID-19,our business could be materially and adversely affected by natural di

199、sasters,such as snowstorms,earthquakes,fires or floods,the outbreak of other widespread health epidemic,such as swine flu,avian influenza,severe acute respiratory syndrome,or SARS,Ebola,Zika or other events,such as wars,acts of terrorism,environmental accidents,power shortage or communication interr

200、uptions.Our business operations could be disrupted if any of our employees is suspected of having any transmissible health epidemic,since this may cause our employees to be quarantined and/or our offices to be temperately shut down.In addition,our results of operations may be adversely affected to t

201、he extent that any of these epidemics harms the Chinese economy in general.We are also vulnerable to natural disasters and other calamities.Fire,floods,typhoons,earthquakes,power loss,telecommunications failures,break-ins,war,riots,terrorist attacks or similar events may give rise to server interrup

202、tions,breakdowns,system failures,technology platform failures or internet failures,which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide content and services on our platform.Increasing focus with respect to environ

203、mental,social and governance matters may impose additional costs on us or expose us to additional risks.Failure to adapt to or comply with the evolving expectations and standards on environmental,social and governance matters from investors and the PRC government may adversely affect our business,fi

204、nancial condition and results of operation.The PRC government and public advocacy groups have been increasingly focused on environment,social and governance(“ESG”)issues in recent years,making our business more sensitive to ESG issues and changes in governmental policies and laws and regulations ass

205、ociated with environment protection and other ESG-related matters.Investor advocacy groups,certain institutional investors,investment funds,and other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and soc

206、ial cost of their investments.Regardless of the industry,increased focus from investors and the PRC government on ESG and similar matters may hinder access to capital,as investors may decide to reallocate capital or to not commit capital as a result of their assessment of a companys ESG practices.An

207、y ESG concern or issue could increase our regulatory compliance costs.If we do not adapt to or comply with the evolving expectations and standards on ESG matters from investors and the PRC government or are perceived to have not responded appropriately to the growing concern for ESG issues,regardles

208、s of whether there is a legal requirement to do so,we may suffer from reputational damage and the business,financial condition,and the price of our ADSs could be materially and adversely effected.Our limited operating history makes it difficult to evaluate our business and prospects.We launched our

209、platform and internet video streaming services in 2010 and have grown rapidly since then.However,due to our limited operating history,our historical growth rate may not be indicative of our future performance.We cannot assure you that our growth rate will be the same as in the past.In addition,we ma

210、y in the future introduce new services or significantly expand our existing services,including those that currently are of relatively small scale or with which we have little or no prior development or operating experience.If these new or enhanced services fail to engage users and customers,our busi

211、ness and operating results may suffer as a result.We cannot assure you that we will be able to recoup our investments in introducing these new services or enhancing existing smaller business lines,and we may experience significant loss and impairment of asset value due to such efforts.Furthermore,as

212、 a technology-based entertainment company,we frequently introduce innovative products and services to our users and advertising customers in order to capture new market opportunities.However,we cannot assure you that our products and services will be well received by our users and advertising custom

213、ers.In addition,it is possible that our users and advertising customers may find our Table of Contents 14 products and services objectionable.For example,there was media reporting in 2017 that the beta-testing version of our Vivi virtual assistant service was deemed by some of our users as offensive

214、.We immediately suspended such service pending further modifications.If our existing or new products and services are not well received by our users and customers,we may suffer damages to our brand image and may not be able to maintain or expand our user and customer base,which in turn may have a ma

215、terial and adverse effect on our business,financial condition and results of operations.You should consider our prospects in light of the risks and uncertainties fast-growing companies with limited operating histories in a fast-evolving industry may encounter.We may not be able to manage our growth

216、effectively or expand our offerings successfully.We have experienced rapid growth since we launched our services in 2010.To manage the further expansion of our business,products and offerings and the growth of our operations and personnel,we need to continuously expand and enhance our infrastructure

217、 and technology,and improve our operational and financial systems,procedures,compliance and controls.We also need to expand,train and manage our growing employee base.In addition,our management will be required to maintain and expand our relationships with talents,content providers,distributors,adve

218、rtising customers,advertising agencies and other third parties.We cannot assure you that our current infrastructure,systems,procedures and controls will be adequate to support our expanding operations.If we fail to manage our expansion effectively,our business,results of operations and prospects may

219、 be materially and adversely affected.We have been constantly endeavoring to develop new products and offerings that provide other contents,content formats or services such as,short-form videos,live broadcastings,online literatures and comics.However,our expansion of new products and offerings may r

220、esult in unseen risks,challenges and uncertainties.We may incur additional expenditure to support our expansion and it may strain our managerial,financial,operational and other resources.Any failure in managing expenditures and evaluating user demands for new products and offerings could materially

221、and adversely affect our business,financial condition and results of operations.We cannot guarantee our monetization strategies will be successfully implemented or generate sustainable revenues and profit.Our monetization model is evolving.We currently generate a substantial majority of our revenues

222、 from membership services and online advertising.We plan to strengthen revenue contribution from our other monetization methods,such as online games,live broadcasting,and IP licensing.We have no proven track record or experience in generating substantial revenues from other monetization methods.If o

223、ur strategic initiatives do not enhance our monetization ability or enable us to develop new approaches to monetization,we may not be able to maintain or increase our revenues or recover any associated costs.In addition,we may in the future introduce new services to further diversify our revenue str

224、eams,including services with which we have little or no prior development or operating experience.If these new or enhanced services fail to engage users,customers or content partners,we may fail to attract or retain users or to generate sufficient revenues to justify our investments,and our business

225、 and operating results may suffer as a result.We have significant working capital requirements and have in the past experienced working capital deficits.If we experience such working capital deficits in the future,our business,liquidity,financial condition and results of operations may be materially

226、 and adversely affected.As a result of changes in our funding position and operating assets and liabilities,we had a working capital deficit(defined as total current assets deducted by total current liabilities)of RMB2,564.2 million(US$393.0 million)as of December 31,2020.The holders of the 2023 Not

227、es may require us to repurchase all or portion for cash on December 1,2021,or upon a fundamental change,at a repurchase price equal to 100%of the principal amount,plus accrued and unpaid interest.As a result,RMB4,752.1 million(US$728.3 million)of the net carrying amount of the 2023 Notes was include

228、d in current liabilities as of December 31,2020.For actions that we plan to take in order to manage our working capital,see“Item 5.Operating and Financial Review and ProspectsB.Liquidity and Capital Resources.”There can be no assurance,however,that we will be able to prudently manage our working cap

229、ital,or raise additional equity or debt financing on terms that are acceptable to us.Our inability to take these actions as and when necessary could materially adversely affect our liquidity,results of operations,financial condition and ability to operate.Our business,prospects and financial results

230、 may be impacted by our relationship with third-party platforms.In addition to our iQIYI platform,we also distribute video content through third-party platforms.We generate membership service and online advertising service revenues through revenue-sharing arrangements with such third-party platforms

231、,which include leading internet companies in China.However,there can be no assurance that our arrangements with those platforms will be extended or renewed after their respective expiration or that we will be able to extend or renew such arrangements on terms and conditions favorable to us.In additi

232、on,if any of such third-party platforms breaches its obligations under any of the agreements entered into with us or refuses to extend or renew it when the term expires,and we cannot find suitable replacement on a timely basis,or at all,we may suffer significant loss to our user base and revenue str

233、eams we have developed therefrom,or lose the opportunity to expand our business through such platform.We may be involved with legal or other disputes with third-party platforms that may affect our relationship with such platforms or have an adverse effect on our business.Table of Contents 15 We face

234、 risks,such as unforeseen costs and potential liability in connection with content we produce,license and/or distribute through our platform.As a producer,licensor and distributor of content,we face potential liability for negligence,copyright and trademark infringement,or other claims based on the

235、content that we produce,license,provide and/or distribute.We also may face potential liability for content used in promoting our service,including marketing materials and features on our platform such as user reviews.We are responsible for the production costs and other expenses of our original cont

236、ent.We also take on risks associated with production,such as completion and key talent risk.To the extent we do not accurately anticipate costs or mitigate risks,including for content that we obtain but ultimately does not appear on our platform,or if we become liable for content we produce,license

237、and/or distribute,our business may suffer.Litigation to defend these claims could be costly and the expenses and damages arising from any liability or unforeseen production risks could harm our results of operations.We may not be indemnified against claims or costs of these types and we may not have

238、 insurance coverage for these types of claims.Videos and other content displayed on our platform may be found objectionable by PRC regulatory authorities and may subject us to penalties and other administrative actions.We are subject to PRC regulations governing internet access and the distribution

239、of videos and other forms of information over the internet.Under these regulations,internet content providers and internet publishers are prohibited from posting or displaying over the internet any content that,among other things,violates PRC laws and regulations,impairs the national dignity of Chin

240、a or the public interest,or is obscene,superstitious,frightening,gruesome,offensive,fraudulent or defamatory.Furthermore,as an internet video streaming platform,we are not allowed to(i)produce or disseminate programs that distort,parody or vilify classic literary works;(ii)re-edit,re-dub or re-capti

241、on the subtitles of classic literary works,radio and television programs,and network-based original audio-video programs,(iii)intercept program segments and splice them into new programs;or(iv)disseminate edited pieces of works that distort the originals.We shall strictly supervise our self-made con

242、tent and the reprogramed videos uploaded by our users and shall not facilitate the dissemination of defective audio-video programs.Failure to comply with these requirements may result in monetary penalties,revocation of licenses to provide internet content or other licenses,suspension of the concern

243、ed platforms and reputational harm.In addition,these laws and regulations are subject to interpretation by the relevant authorities,and it may not be possible to determine in all cases the types of content that could cause us to be held liable as an internet content provider.For a detailed discussio

244、n,see“Item 4.Information on the CompanyB.Business OverviewGovernment RegulationRegulations on Internet Content Providers”,“Item 4.Information on the CompanyB.Business OverviewGovernment RegulationsRegulations on Internet Audio-video Program Services”and“Item 4.Information on the CompanyB.Business Ov

245、erviewGovernment RegulationsRegulations on Information Security,Censorship and Privacy.”Internet platform operators may also be held liable for the content displayed on or linked to its platform that is subject to certain restrictions.In addition to professionally produced content,we allow our users

246、 to upload other video content,such as internet movies,internet drama series,interactive videos,vertical or horizontal videos,short-form videos,micro-videos,and video blogs,or Vlogs,among others.Although we have adopted internal procedures to monitor the content displayed on our platform,due to the

247、significant amount of content uploaded by our users,we may not be able to identify all videos or other content that may be illegal or otherwise objectionable.In addition,we may not be able to always keep these internal procedures abreast of changes in the PRC governments requirements for content dis

248、play.See“Item 4.Information on the CompanyBusiness OverviewContent Monitoring”for more details relating to our content monitoring procedures.Failure to identify and prevent illegal or inappropriate content from being displayed on our platform may subject us to liability,government sanctions or loss

249、of licenses and/or permits.To the extent that PRC regulatory authorities,such as Cyberspace Administration of China,which has promulgated the Provisions on the Governance of Network Information Content Ecology with effect from March 1,2020,find any content displayed on our platform objectionable,the

250、y may require us to limit or eliminate the dissemination of such content on our platform in the form of take-down orders or otherwise.In the past,we have from time to time received phone calls and written notices from the relevant PRC regulatory authorities requesting us to delete or restrict certai

251、n content that the government deemed inappropriate or sensitive.The National Radio and Television Administration,or the NRTA(previously known as the State Administration of Press Publication,Radio,Film and Television,or the SAPPRFT),publishes from time to time lists of content that is objectionable,

252、and we monitor content uploaded on to our platform and remove those referenced in the list.In addition,regulatory authorities may impose penalties on us for content displayed on or linked to our platform in cases of material violations or lacking proper license,including a revocation of our operatin

253、g licenses or a suspension or shutdown of our online operations.Although we have not been materially penalized for our content so far,in the event that the PRC regulatory authorities find the video and other content on our platform objectionable and impose penalties on us or take other actions again

254、st us in the future,our business,results of operations and reputation may be materially and adversely affected.Moreover,the costs of compliance with these regulations may continue to increase as a result of more content uploaded by our users.Table of Contents 16 We operate in a rapidly evolving indu

255、stry.If we fail to keep up with the technological developments and users changing requirements,our business,results of operations and prospects may be materially and adversely affected.The internet video streaming industry is rapidly evolving and subject to continuous technological changes.Our succe

256、ss will depend on our ability to keep up with the changes in technology and user behavior resulting from the technological developments.As we make our services available across a variety of mobile operating systems and devices,we are dependent on the interoperability of our services with popular mob

257、ile devices and mobile operating systems that we do not control,such as Android and iOS.Any changes in such mobile operating systems or devices that degrade the functionality of our services or give preferential treatment to competitive services could adversely affect usage of our services.Further,i

258、f the number of platforms for which we develop our services increases,which is typically seen in a dynamic and fragmented mobile services market such as China,it will result in an increase in our costs and expenses.If we fail to adapt our products and services to such changes in an effective and tim

259、ely manner,we may suffer from decreased user traffic,which may result in reduced member base and number of advertising customers using our online advertising services.Furthermore,changes in technologies may require substantial capital expenditures in product development as well as in modification of

260、 products,services or infrastructure.We may not execute our business strategies successfully due to a variety of reasons such as technical hurdles,misunderstanding or erroneous prediction of market demand or lack of necessary resources.Failure to keep up with technological development may result in

261、our products and services being less attractive,which,in turn,may materially and adversely affect our business,results of operations and prospects.We have been,and may continue to be,subject to liabilities for infringement,misappropriation or other violation of third-party intellectual property righ

262、ts or other allegations based on the content available on our platform or services we provide.Our success depends,in large part,on our ability to operate our business without infringing,misappropriating or otherwise violating third-party rights,including third-party intellectual property rights.Comp

263、anies in the internet,technology and media industries own,and are seeking to obtain,a large number of patents,copyrights,trademarks and trade secrets,and they are frequently involved in litigation based on allegations of infringement,misappropriation or other violations of intellectual property righ

264、ts or other related legal rights.There may be patents issued or pending that are held by others that cover significant aspects of our technologies,products,or services,and such third parties may attempt to enforce such rights against us.In addition,we may not have obtained licenses for all content w

265、e offer and the scope,type and term of the licenses we obtained for certain content may not be broad enough to cover all fashions we currently employ or may employ in the future.In addition,if any purported licensor does not actually have sufficient authorization relating to the content or right to

266、license a content to us,or if such purported licensor had lost its authorization to sub-license content that we are distributing on our platform,and do not timely inform us of such loss of authorization,we may be subject to claims of intellectual property infringement from third parties.Although we

267、have set up certain procedures to enable copyright owners to provide us with notice of alleged infringement,given the volume of content available on our platform,it is not possible,and we do not attempt to,identify and remove or disable all potentially infringing content that may exist.Similarly,alt

268、hough we have set up screening processes to try to filter out or disable access to content that we have previously been informed is subject to claims of copyright or other intellectual property protection,we do not attempt to filter out or disable access to all potentially infringing content availab

269、le through our services.As a result,third parties may take action and file claims against us if they believe that certain content available on our platform violates their copyrights or other intellectual property rights.We have been,and may in the future be,subject to such claims filed in China and

270、other jurisdictions.We have been involved in litigation based on allegations of infringement of third-party copyright,including information network dissemination rights,and other rights,due to the content available on our platform.We were subject to a total of 1,416 lawsuits in China for alleged cop

271、yright infringement between January 1,2018 and December 31,2020,in connection with our platform.Approximately 67.8%of the lawsuits filed from January 1,2018 through December 31,2020 in connection with the iQIYI platform were rejected by relevant PRC courts,withdrawn by the plaintiffs or settled by t

272、he parties.As of December 31,2020,a total of 380 lawsuits against us in connection with our platform were pending,with the aggregate amount of damages sought under these pending cases being RMB269.1 million(US$41.2 million).Our platform allows users to search the internet for content that resides on

273、 certain third parties servers and online platforms.While uncertainties still exist with respect to the legal standards as well as the judicial interpretation of such standards for determining liabilities for our providing links and access to content on third-party servers and websites that infringe

274、s others copyrights and other intellectual property rights under PRC laws and the laws of other jurisdictions,third parties may take action and file claims against us if they believe that certain content we provide links or access to through our platform violates their copyrights or other intellectu

275、al property rights.Table of Contents 17 We cannot assure you that we will not be subject to copyright laws or legal proceedings initiated by third parties in other jurisdictions,such as the United States,as a result of the ability of users to access our videos and other content in the United States

276、and other jurisdictions,the ownership of our ADSs by investors in the United States and other jurisdictions,the extraterritorial application of foreign law by foreign courts,the fact that we sub-licensed content from licensors who in turn obtained their authorizations from content providers in the U

277、nited States and other jurisdictions or otherwise.In addition,as a publicly listed company,we may be exposed to increased risk of litigation.If a claim of infringement brought against us in the United States or other jurisdictions is successful,we may be required to,upon enforcement,(i)pay substanti

278、al statutory or other damages and fines,(ii)remove relevant content from our platform or(iii)enter into royalty or license agreements which may not be available on commercially reasonable terms or at all.Moreover,although U.S.copyright laws,including the Digital Millennium Copyright Act(17 U.S.C.512

279、),or the DMCA,provide safeguards or“safe harbors”from claims in the U.S.for monetary relief for copyright infringement for certain entities that host user-uploaded content or provide information location tools that may link to infringing content,these safe harbors only apply to companies that comply

280、 with specified statutory requirements.While we seek to voluntarily comply with DMCA safe harbor requirements,we cannot ensure that we satisfy all of the requirements of any DMCA safe harbor.It is possible that we could be subject to claims of copyright infringement or other violation of intellectua

281、l property rights in the U.S.and be required to pay substantial damages or prevented from offering all or part of our services in the U.S.We have been subject to lawsuits in China for alleged unfair competition in connection with our platform.We may also face litigation or administrative actions for

282、 defamation,negligence,copyright and trademark infringement,or other purported injuries resulting from the content we provide or the nature of our services.Such litigation and administrative actions,with or without merits,may be expensive and time-consuming and may result in significant diversion of

283、 resources and management attention from our business operations.Furthermore,such litigation or administrative actions may adversely affect our brand image and reputation.In addition,we operate our platform primarily through our consolidated affiliated entities and their subsidiaries,and our ability

284、 to monitor content as described above depends in large part on the experience and skills of the management of,and our control over,those consolidated affiliated entities.Our control over the management and operations of our consolidated affiliated entities through contractual arrangements may not b

285、e as effective as that through direct ownership.See“Risks Related to Our Corporate StructureWe rely on contractual arrangements with our consolidated affiliated entities and their shareholders for our business operations,which may not be as effective as direct ownership in providing operational cont

286、rol.”We may not be able to adequately protect our intellectual property rights,and any failure to protect our intellectual property rights could adversely affect our revenues and competitive position.We believe that trademarks,trade secrets,copyright,and other intellectual property we use are critic

287、al to our business.We rely on a combination of trademark,copyright and trade secret protection laws in China and other jurisdictions,as well as confidentiality procedures and contractual provisions to protect our intellectual property and our brand.Protection of intellectual property rights in China

288、 may not be as effective as in the United States or other jurisdictions,and as a result,we may not be able to adequately protect our intellectual property rights,which could adversely affect our revenues and competitive position.In addition,any unauthorized use of our intellectual property by third

289、parties may adversely affect our revenues and our reputation.In particular,our members may abuse their membership privilege and illegally distribute paid content exclusively available to paid members,which could have a material and adverse effect on our financial condition,results of operations and

290、prospects.Further,we may have difficulty addressing the threats to our business associated with piracy of our copyrighted content,particularly our original content.Our content and streaming services may be potentially subject to unauthorized consumer copying and illegal digital dissemination without

291、 an economic return to us.We adopt a variety of measures to mitigate risks associated with piracy,including by litigation and through technology measures.We cannot assure that such measures will be effective.In addition,while we typically require our employees,consultants and contractors who may be

292、involved in the development of intellectual property to execute agreements assigning such intellectual property to us,we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own.In addition,such agreements may not be self

293、-executing such that the intellectual property subject to such agreements may not be assigned to us without additional assignments being executed,and we may fail to obtain such assignments.In addition,such agreements may be breached.Accordingly,we may be forced to bring claims against third parties,

294、or defend claims that they may bring against us related to the ownership of such intellectual property.Furthermore,policing unauthorized use of proprietary technology is difficult and expensive,and we may need to resort to litigation to enforce or defend intellectual property or to determine the enf

295、orceability,scope and validity of our proprietary rights or those of others.Such litigation and an adverse determination in any such litigation could result in substantial costs and diversion of resources and management attention.Table of Contents 18 If our security measures are breached,or if our p

296、roducts and services are subject to attacks that degrade or deny the ability of users to access our products and services,our products and services may be perceived as insecure,users and advertising customers may curtail or stop using our products and services and our business and operating results

297、may be harmed.Our products and services involve the storage and transmission of users and advertising customers information,particularly billing data,as well as original content,and security breaches expose us to a risk of loss of this information,loss of users,litigation and potential liability.We

298、experience cyber-attacks of varying degrees on a regular basis,including hacking into our user accounts and redirecting our user traffic to other internet platforms,and we have been able to rectify attacks without significant impact to our operations in the past.Functions that facilitate interactivi

299、ty with other internet platforms could increase the scope of access of hackers to user accounts.We take measures to protect against unauthorized intrusion into our users data.Despite these measures we,our payment processing services or other third-party services we use could experience an unauthoriz

300、ed intrusion into our users data.In the event of such a breach,current and potential users may become unwilling to provide the information to us necessary for them to become users or members.Additionally,we could face legal claims or regulatory fines or penalties for such a breach.The costs relating

301、 to any data breach could be material,and we currently do not carry insurance against the risk of a data breach.For these reasons,should an unauthorized intrusion into our users data occur,our business could be adversely affected.Our security measures may also be breached due to employee error,malfe

302、asance or otherwise.For example,we face risks of users bypassing the membership verification process on our platform with illegal technology and manipulating our system into recognizing them as paid members.As a result,such users may illegally gain access to premium content without purchasing our me

303、mbership.Additionally,outside parties may attempt to fraudulently induce employees,users or customers to disclose sensitive information in order to gain access to our data or our users or customers data or accounts,or may otherwise obtain access to such data or accounts.Since our users and customers

304、 may use their accounts to establish and maintain online identities,unauthorized communications from accounts that have been compromised may damage their reputations and brands as well as ours.Furthermore,we face the risk of hackers gaining illegal access to and illegally distributing our original c

305、ontent that has not been released.While such incidents have not occurred in the past,we cannot assure you that they will not happen in the future.Any such breach or unauthorized access could result in significant legal and financial exposure,damage to our reputation and a loss of confidence in the s

306、ecurity of our products and services that could have an adverse effect on our business and operating results.Because the techniques used to obtain unauthorized access,disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target,we may

307、be unable to anticipate these techniques or to implement adequate preventative measures.If an actual or perceived breach of our security occurs,the market perception of the effectiveness of our security measures and our reputation and relationships with users could be harmed,we may lose users and cu

308、stomers and we may be exposed to significant legal and financial risks,including legal claims and regulatory fines and penalties.Any of these actions could have a material and adverse effect on our business,reputation and operating results.We rely upon our partner to make our service available throu

309、gh smart TV.In smart TV video streaming market,only a small number of qualified license holders can provide internet audio and visual program service to the TV terminal users via smart TVs,set-top boxes and other electronic products.Most of those license holders are radio or TV stations.Private comp

310、anies that wish to operate such business need to cooperate with those license holders to legally provide relevant services.We entered into a joint venture with Galaxy Internet Television Co.,Ltd.,our license partner,and the joint venture currently offers certain of our members the ability to receive

311、 streaming content through smart TV.If we are not successful in maintaining existing or creating new relationships,or if we encounter technological,content licensing,regulatory or other impediments to delivering our streaming content to our members via these devices,our ability to grow our business

312、may be adversely impacted.Advertisements shown on our platform may subject us to penalties and other administrative actions.Under PRC advertising laws and regulations,we are obligated to monitor the advertising content shown on our platform to ensure that such content is true,accurate and in full co

313、mpliance with applicable laws and regulations.In addition,where a special government review is required for specific types of advertisements prior to posting,such as advertisements relating to pharmaceuticals,medical instruments,agrochemicals and veterinary pharmaceuticals,we are obligated to confir

314、m that such review has been performed and approval has been obtained from competent governmental authority.To fulfill these monitoring functions,we include clauses in all of our advertising contracts requiring that all advertising content provided by advertising agencies and advertisers must comply

315、with relevant laws and regulations.Under PRC law,we may have claims against advertising agencies and advertisers for all damages to us caused by their breach of such representations.Violation of these laws and regulations may subject us to penalties,including fines,confiscation of our advertising in

316、come,orders to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information.In circumstances involving serious violations,such as posting a pharmaceutical product advertisement without approval,or posting an advertisement for fake pharmaceutic

317、al product,PRC governmental authorities may force us to terminate our advertising operation or revoke our licenses.Table of Contents 19 A majority of the advertisements shown on our platform are provided to us by third parties.Although we have implemented automated and manual content monitoring syst

318、ems and significant efforts have been made to ensure that the advertisements shown on our platform are in full compliance with applicable laws and regulations,we cannot assure you that all the content contained in such advertisements is true and accurate as required by the advertising laws and regul

319、ations,especially given the large volume of in-feed ads and the uncertainty in the application of these laws and regulations.In addition,advertisers,especially in-feed advertisers,may through illegal technology evade our content monitoring procedures to show advertisements on our platform that do no

320、t comply with applicable laws and regulations.The inability of our systems and procedures to adequately and timely discover such evasions may subject us to regulatory penalties or administrative sanctions.Although we have not been subject to material penalties or administrative sanctions in the past

321、 for the advertisements shown on our platform,if we are found to be in violation of applicable PRC advertising laws and regulations in the future,we may be subject to penalties and our reputation may be harmed,which may have a material and adverse effect on our business,financial condition,results o

322、f operations and prospects.If we cannot maintain our corporate culture as we grow,we could lose the innovation,collaboration and focus that contribute to our business.We believe that a critical component of our success is our corporate culture,which fosters innovation and cultivates creativity.As we

323、 continue to expand and grow our business,we may find it difficult to maintain these valuable aspects of our corporate culture.Any failure to preserve our culture could undermine our reputation and negatively impact our ability to attract and retain employees,which would in turn jeopardize our futur

324、e success.Our quarterly operating results may fluctuate,which makes our results of operations difficult to predict and may cause our quarterly results of operations to fall short of expectations.Our quarterly operating results have fluctuated in the past and may continue to fluctuate depending upon

325、a number of factors,many of which are out of our control.Our operating results tend to be seasonal.For instance,we have experienced lower online advertising services revenue in the first quarter of each year in connection with the Chinese New Year holiday as advertisers limit their budget for online

326、 platforms and less blockbuster content is released during that period.Furthermore,our content distribution revenue may fluctuate significantly from quarter to quarter as a result of the varying availability of popular content titles for distribution and adjustments to our market strategies.For thes

327、e reasons,comparing our operating results on a period-to-period basis may not be meaningful,and you should not rely on our past results as an indication of our future performance.Our quarterly and annual revenues and costs and expenses as a percentage of our revenues in a given period may be signifi

328、cantly different from our historical or projected rates and our operating results in future quarters may fall below expectations.Disruption or failure of our IT systems,cybersecurity related threats or our failure to timely and effectively scale and adapt our existing technology and infrastructure c

329、ould impair our users online entertainment experience and adversely affect our reputation,business and operating results.Our ability to provide users with a high-quality online entertainment experience depends on the continuous and reliable operation of our IT systems.We cannot assure you that we wi

330、ll be able to procure sufficient bandwidth in a timely manner or on acceptable terms or at all.Failure to do so may significantly impair user experience on our platform and decrease the overall effectiveness of our platform to both users and advertisers.Disruptions,failures,unscheduled service inter

331、ruptions or a decrease in connection speeds could hurt our reputation and cause our users and advertising customers to switch to our competitors platforms.Our IT systems and proprietary content delivery network,or CDN,are vulnerable to damage or interruption as a result of fires,floods,earthquakes,p

332、ower losses,telecommunications failures,undetected errors in software,computer viruses,hacking and other attempts to harm our systems.These interruptions may be due to unforeseen events that are beyond our control or the control of our third-party service providers.For example,we have experienced in

333、termittent interruptions for up to 48 hours of viewer access to one popular drama title in the past.In addition,in February 2020,we have experienced intermittent interruption for approximately two hours of user access to our platform.Such interruption was caused by a malfunction at an internet data center,combined with slow response from our backup server supplier caused by the COVID-19 outbreak a