Back in 2011, Chinese streaming site iQiyi paid for the rights to Transformers: Dark of the Moon , betting that the Michael Bay-directed Hollywood blockbuster would help jump-start its efforts to attract fee-paying viewers. The robot flick sputtered. Three years later, Beijing Love Story , a local film about five pairs of lovers, helped iQiyi sign up its first five million paid subscribers. Since then, Chinese hits like Wolf Warrior , The Wandering Earth , Operation Red Sea and Detective Chinatown have convinced iQiyi chief executive Gong Yu that the future lies in original local content. “We want to make original films one of our top priorities in the coming two to three years,” Gong, 51, said in a recent interview in Beijing. “With the slower growth in China’s box office, lower attendance rates at cinemas and the limited options of movies for the country’s cinema-goers, we think the timing for us to make a change in the movie industry has arrived.” The company, China’s biggest streaming company by subscribers, announced a plan this month to invest in six films in 2019, each with a budget of between 20 million yuan (US$2.9 million) and 50 million yuan. Spending may be increased in the future if the plan proves successful. iQiyi was behind the production and distribution of the popular variety show The Rap of China as well as the hit period drama The Story of Yanxi Palace . The move to promote local content is borne out by the numbers. Domestically produced films accounted for 62 per cent of China’s total box office takings in 2018, compared with 48.5 per cent in 2012, according to data from the State Film Administration. Video streamer iQiyi signs deal to bring Bollywood to China Films with heroic themes have done particularly well, such as Wolf Warrior 2 and The Wandering Earth . The first tells of a Chinese soldier who protects medical aid workers in Africa, the latter featured a Chinese astronaut sacrificing himself to save Earth. iQiyi, which is controlled by search giant Baidu, invests heavily to acquire exclusive licensing rights of existing film catalogues from movie studios to fend off competition from rival movie streaming platforms backed by deep-pocketed Tencent Holdings and Alibaba Group, the parent company of South China Morning Post . “Chinese consumers no longer care about whether a movie is a made-in-US blockbuster or not, they will go and watch a movie as long as the content quality is good,” said Ya Ning, president of iQiyi Pictures. Ya added that is why even when facing competition from big-name movie Avengers: Endgame , which is smashing all kinds of box office records in China, Lebanon’s relatively unknown Capharnaum still able to secure more than 200 million yuan in box office with almost a mouth-to-mouth marketing. In the West, the heavy investments by Netflix in original movies has made the US streaming service giant a formidable competitor to traditional Hollywood studios as its rich offering of at-home entertainment could mean less time and money spent by consumers at theatres Netflix has also upended the traditional practice of “windows”, where new films would not be shown on TV until the theatrical release was finished. Ignoring this time frame has become an irritant for traditional studios but a source of pride for Netflix that likes to do things its own way. The disruption caused by Netflix in the movie industry has even irritated legendary director Steven Spielberg, who recently proposed rule changes that would prevent films from Netflix and other streaming outlets like Amazon, from qualifying for Oscars contention. However, the proposal was rejected by the Academy of Motion Picture Arts and Sciences after a warning from the US Department of Justice antitrust division in March saying that excluding streaming-only movies may violate antitrust laws. China’s Iron Man knock-off never made it on streaming video However, iQiyi’s strategy does not involve putting cinemas out of business. Rather, it wants to make original movies that have a limited theatrical window before being available to online subscribers. Gong said iQiyi would share the financial gain “with all parties involved”. Under iQiyi’s original movie plan, the company will guarantee a small profit for its partnered production studio, a bigger cut of box office revenue for cinema chains and a slight discount to cinema-goers to allow its movies to better reach offline and after a certain theatrical window when the movie will be allowed to view at home, it will start making money online. In the first quarter of 2019 when China’s box office revenue was down 8 per cent year-on-year combined with drops in both cinema visitor number and movie attendance rate, iQiyi saw a 68 per cent year-on-year increase in the number of people who watched movies on its platform as more Chinese are shifting to on-demand entertainment at their living rooms or even on their smartphones. “The first window of opportunity (for movie industry) is still to screen them in cinemas. The second window of opportunity is to show them on platforms like iQiyi. What we want (with the original movie plan) is to maximise the total revenue,” said Gong. “What we want to do is to cover the cost of production, guaranteeing a small profit for the production house and offering a bigger share of box office income for cinema chains.” For Gong, quality beats quantity because he sees an oversupply of mediocre content in the Chinese market. He added that the investment in original movies is not expected to trigger widening losses as iQiyi would trim certain investment in online dramas and entertainment shows. In 2018, iQiyi lost over US$1.3 billion despite rapid growth in revenue and subscriber numbers. ByteDance to enter long-form streaming video market Starting earlier this year, the company began trialing artificial intelligence-powered analysis of screen content. The algorithms, developed in-house, scan the content and generate a report on the genre, characters, story arc and intended target audience. “Sometimes decision makers behind a production may not be the target audience of the show,” said Liu Wenfeng, chief technology officer of iQiyi. “With the help of AI, we can add value at minimal cost and ensure they are more well-informed of popular trends.” The company does not not have a timetable for turning a profit. According to Gong, internet technologies serve as a catalyst to enable companies like iQiyi to reshape the entertainment industry at a far more rapid pace than traditional players. “If we want to do it faster, we need to invest more money and people in the early stage,” said Gong.