Bilibili does so in two main ways: by offering games where players purchase virtual items to advance to the next level, and access to original and licensed films and series. This Netflix-like business, launched in 2018, now has 14.5m paying subscribers.
The share of users who pay for things like in-game accessories and subscriptions has risen from 3.9% in 2018 to 8.0% in 2020. Receipts from these sources helped Bilibili nearly to double its revenues in each of the past three years, to 12bn yuan ($1.7bn) in 2020. It also sells adverts on parts of its platform, but they made up less than fifth of its sales (compared with the vast majority of YouTube’s).
All this has yet to make any money. Last year Bilibili reported an operating loss of 3bn yuan, double the shortfall in 2019. Profits may remain elusive; the company must invest to maintain a pipeline of addictive games and pays top dollar to outbid big streamers like iQiyi for the rights to popular movies and shows its nascent subscription business needs.
Bilibili’s executives are sanguine. “As our net revenues continue to grow, we do not expect our total content costs as a percentage of total revenue to substantially increase,” they wrote in the prospectus for the firm’s Hong Kong listing. Its share price, down by a third since its February peak, suggests investorswant finally to see some proof.