According to a research report released by Xinda Securities obtained by the Wise Finance APP, based on calculations by iResearch, the market size of the short video industry in 2023 is 35.86 billion yuan, an increase of 234.5% from 2023. Influenced by factors such as further tightening of policies and platform regulations, continuous upgrading of user demand for content quality, and internal adjustments brought about by market competition, the overall industry scale continues to grow driven by market demand. Under the influence of multiple positive factors, the trend of high-quality content in short videos is becoming increasingly prominent, which is also a key factor driving the high-quality development of the industry.

Cinda Securities' main points are as follows:

The short-term industry has been included in industry regulation to ensure the stable and healthy sustainable development of the industry.

People's Daily article highlights the increasing attention to short videos, with high-quality development being a top priority. It explores directions such as "short video + cultural tourism". According to calculations by iResearch, the market size of the short video industry in 2023 is 35.86 billion yuan, an increase of 234.5% from 2023. Influenced by factors such as further tightening of policies and platform regulations, continuous upgrading of user demand for content quality, and internal adjustments brought about by market competition, the overall industry scale continues to grow driven by market demand. Under the influence of multiple positive factors, the trend of high-quality content in short videos is becoming increasingly prominent, which is also a key factor driving the high-quality development of the industry.

Byte's short video product - Hongguo Short Video has the potential to outperform the market relying on a completely free model and Byte's traffic support, as the domestic short video market tends towards a free model.

Hongguo Short Video is a short video product launched by Douyin Group in May 2023, which gained market recognition after transitioning from an early paid model to a free model. By March 2024, Hongguo's average daily usage per capita had reached approximately 1.38 hours, surpassing platforms such as Youku, Tencent Video, and Mango TV. According to data released by the third-party institution QuestMobile: in September 2024, Hongguo's monthly active users reached 0.12 billion, a year-on-year increase of 1045.9%. Hongguo Short Video is expected to attract a larger user base through the free model, backed by Byte's content and traffic support, gaining significant competitive advantages in content production, marketing promotion, app traffic diversion, and precise acquisition of different types of user profiles.

Short dramas have experienced rapid growth in overseas markets, with both download volume and in-app purchase revenue continuing to increase.

From November 2022 to October 2024, more than 100 short drama applications were active in overseas markets. Excluding applications with no download data for three months, 83 overseas short drama applications had a cumulative download volume exceeding 0.287 billion and in-app purchase revenue of $0.49 billion (equivalent to 3.547 billion yuan) during the statistical period. Looking at the growth trend of short dramas going international, the download volume of overseas short drama applications has surged this year. Data from May to August 2024 more than doubled, and a second even faster growth wave came in September, with the download volume increasing by nearly 1.3 times between September and October in just one month.

Business model of exporting short dramas: Short drama payment models generally include single-episode payment, subscription, and advertising monetization.

1) In-App Purchase (IAP) model: Single episode unlock: Currently the primary monetization method for short dramas going international, with payment made for each drama episode. The ratio of episodes unlocked to total episodes is used as a depth value for payment unlocks, with different pricing ranges based on different unlock episode/content/region combinations. Subscription model: Subscriptions are a more common payment method for European and American users, but not all short drama apps currently offer a subscription service. 2) In-App Advertising Monetization (IAA) model; 3) Hybrid monetization.

The latest performance of ReelShort, the overseas short drama platform of Chinese online, revealed that the company's revenue in the first half of the year was approximately 1.086 billion yuan, with a net income of about 22.93 million yuan, both exceeding the previous year's full-year levels.

According to SensorTower data, ReelShort's total net revenue in Q3 2024 was $63.43 million, representing a 52% increase quarter-on-quarter and a 327% increase year-on-year. The total net revenue for the period of January to September 2024 was $0.14 billion, showing a 688% year-on-year growth. The newly launched overseas short drama platform Sereal+ by Chinese online also made progress, with a net revenue of $13.45 million in Q3 2024, a 153% increase quarter-on-quarter; 2.21 million downloads, a 345% increase month-on-month; and an average MAU of 0.71 million. It holds a relatively leading position in the market competition.

Summary of viewpoints:

It is recommended to focus on platform companies leading in the scale of short dramas, such as col group co.,ltd. (300364.SZ); pay attention to film and television companies with leading production capabilities, such as Ningmeng Films (09857); focus on Qihuo Mountain, which possesses high short drama production capacity; pay attention to marketing companies with content marketing and overseas capabilities, which are expected to extend the monetization chain of short drama content, such as inly media co., ltd. (603598.SH); pay attention to reading companies with rich IP, highly synergistic with short drama formats, such as ireader technology (603533.SH); and focus on Zhongguang Tianze (603721.SH), which, in addition to content layout, also has a logic for short drama approvals.

Investment strategy:

Short drama water display performance is lower than expected risks, policy regulation risks, macroeconomic risks.