The short drama industry is expected to further improve in quality, with an increase in the supply of quality content and the waves of short dramas going overseas driving industry scale growth.
According to Zhito Finance APP, gf sec has released a research report stating that the short drama industry is likely to further enhance quality, with an increase in the supply of quality content and the waves of short dramas going overseas driving industry scale growth. Among them, under the accelerated commercialization of domestic short drama apps, it is expected that more content producers will be able to achieve revenue growth within the Hongguo ecosystem; as TikTok's volume increases and commercialization accelerates, short drama platforms that rely heavily on purchasing traffic are expected to enjoy the benefits of changes in overseas traffic patterns. Additionally, AI empowerment is expected to optimize short drama production capabilities, reduce costs and increase efficiency in content production, and improve the accuracy of traffic investment.
GF Securities' main points are as follows:
The standardization of the short drama industry is advancing, with the supply of high-quality micro short dramas, free models, going overseas, and AI empowerment driving scale growth.
According to the "White Paper on the Development of China's Micro Short Drama Industry (2024)" released by the China Internet Audio-Visual Program Service Association, the market size of micro short dramas is expected to reach 50.4 billion yuan in 2024, with a year-on-year growth of nearly 35%. At the same time, the standardization of the industry is also continuously advancing, encouraging the 'uplinking' and 'going overseas' of high-quality micro short dramas, while the management of excessive entertainment is becoming stricter. The short drama industry is expected to further improve in quality, with an increase in the supply of quality content and the waves of short dramas going overseas driving industry scale growth.
Hongguo is experiencing a strong growth surge, benefiting ecological partners.
In the domestic short drama apps segment, there is a competitive landscape presenting Hongguo alongside two strong competitors, Hemma and Xingya. According to QM data, by September 2024, Hongguo short drama's MAU will exceed 0.12 billion. Within the Byte ecosystem, under the free model of Hongguo short dramas, a virtuous cycle is realized: 'Content generation → Advertising monetization → Revenue sharing → Incentivizing content creators to produce more and better content → Growth in platform users and viewing duration → Increase in advertising revenue.'
According to the September short drama monthly report released by Hongguo, the revenue sharing of Hongguo short dramas in September continued to exceed 0.2 billion, with 4 works generating revenue exceeding 3 million in a single month, and more than 30 works reaching million-level revenue in the same period. With accelerated commercialization, it is expected that more content providers will achieve revenue growth in the Hongguo ecosystem.
The overseas market is vast, with content and platforms rapidly going global.
There is a bullish outlook on the overseas short drama market and the profit margin potential for corresponding companies abroad. The overseas short drama market has significant space, with varying preferences for content themes and willingness to pay across different regions, providing development opportunities for domestic content production companies. With the rise and commercialization of TikTok, short drama platforms that rely on purchasing traffic are also expected to benefit from changes in the overseas traffic landscape.
With AI empowerment, content production will reduce costs and increase efficiency, and the precision of traffic investment will improve.
In the script generation phase, the ability of AI to generate enjoyable aspects of short dramas is expected to be optimized; moreover, through AI technology, domestic short dramas can be quickly translated and subtitled for launch overseas, expanding platform content volume; at the same time, some domestic short dramas can employ AI face-swapping for overseas testing as a thematic trial, lowering the trial and error costs of subsequent local filming; in the traffic investment segment, AI empowerment will reduce costs and enhance efficiency in traffic slicing production, allow for more refined user tagging, and increase the precision of placements, which is expected to boost hit rates as well as the profit margins of content and platforms.
High-quality micro short dramas supplement content for long video platforms, which is expected to stabilize user engagement and viewing duration.
Mango TV, iqiyi, and others have already launched micro short drama sections. Mango plans to further strengthen its micro short drama layout by 2025, focusing on recruiting talented individuals, resource integration, and enriching its offerings.
Investment advice:
(1) Platform companies: Recommend mango excellent media (300413.SZ), pay attention to col group co.,ltd. (300364.SZ), h&r century union corporation (000892.SZ) (short drama mini program Fenglin short drama), and Haikan shares (301262.SZ) etc.
(2) Content production companies: Recommend zhejiang huace film & tv (300133.SZ), Ningmeng film and television (09857), pay attention to h&r century union corporation (000892.SZ), super telecom (603322.SH), and tvzone media (603721.SH) etc.
(3) Marketing companies: Recommend Yidian Tianxia (301171.SZ), bluefocus intelligent communications group (300058.SZ), pay attention to guangdong insight brand marketing group (300781.SZ), leo group co.,ltd. (002131.SZ) (layout short drama placement tools), inly media co., ltd (603598.SH) etc.
(4) Technology companies: Pay attention to super telecom (603322.SH), kunlun tech (300418.SZ) (AI short drama platform SkyReels launched in the USA on 12/10) etc.
(5) Content review: Pay attention to wasu media holding (000156.SZ) etc.
Risk warning: Industry regulations tightening, rising industry customer acquisition costs, increasing industry competition.
