iQiyi, China's answer to Netflix, carried out a round of large-scale layoffs on Dec.1, reflecting the company's dilemma.

According to people familiar with the matter, this is the largest round of layoffs in the company's history, involving several business units such as content, gaming, and smart hardware.

The layoffs are aimed at streamlining the management and helping the company achieve profitability, said the source. Therefore, middle-level management and senior employees are at the center of the layoff storm.

Gong Yu, CEO of iQiyi, once said that the COVID-19 pandemic and the censorship system have led to a serious shortage of content supply, which has plagued the development of the industry. 

The streaming media company recently released a disappointing third-quarter financial report, and its operating loss expanded to 1.4 billion yuan ($220 million) from 1.2 billion yuan in the same period last year.

What's more frustrating is that the company lost 2.6 million subscribers since June, and analysts at China Renaissance reckon another 3.5 million will walk by the end of December.

"As the regulation of the Internet industry becomes the new normal, our main goal in the future is to reduce our losses first, and we will further optimize our content costs," the Beijing-headquartered company said in the earnings call conference.

Fortunately, the company's overseas business is going smoothly. According to iQiyi, its user base in Southeast Asia has grown dramatically, with Thailand and Malaysia having the highest number of app downloads. “We will continue to export our original content to various regions around the world, especially countries with similar cultural backgrounds," said the company 

At the bottom end of the company's financial guidance, iQiyi anticipates fourth-quarter sales to dip as much as 5% year on year.

In 2018, the firm was listed on the Nasdaq with an IPO price of 18 per share and a market capitalization of $13 billion. As of December 1, the company's market capitalization has dropped by more than 60% this year.