Gf Securities Co., Ltd. has released a research report noting that both live-action and AI-generated short-form dramas demonstrate resilience in consumer demand. As distribution channels are eliminated and supply overhang clears, traffic will increasingly concentrate on premium content, boosting lifetime value (LTV) and returning to a content-driven logic where spending is tied to quality.
Domestic content producers and traffic distributors are shifting en masse to overseas markets. Localization expertise and vertical operations are key reasons why platforms like Netshort have gained a competitive edge. Meanwhile, the industry continues to explore new traffic distribution vehicles, with AI interactive dramas showing potential.
Key Insights from the Report
The turbulence in the AI and live-action short-form drama sectors since 2026 stems from business model adjustments by a dominant, single-platform ecosystem during different stages of product development. Since February 2026, this single-system has become the absolute center of production and consumption. ByteDance's ecosystem not only controls the primary traffic gateways for short-form drama viewing (Douyin, Hongguo) but also leverages its content distribution capabilities to hold significant bargaining power over traffic distributors and content creators, while also controlling the pricing of upstream production resources (such as the Seedance model, Jimeng AI creation tools, and Tomato Novel IP rights).
(1) After nearly five years of development, live-action short-form dramas have already moved past the phase of "platforms gradually reclaiming distribution rights," a decline in Douyin traffic distribution, and upstream contraction. Hongguo's "volume-over-quality" land-grab model is transitioning towards a premium, head-content focus following the cancellation of universal subsidies in 2026. (2) The AI short-form drama model, characterized by heavy traffic spending to "bet on hits," has gradually normalized after mid-year model price increases, platform share adjustments, and stricter regulation. Oversupply and homogenization have reduced success rates from traffic spending, while viewership growth has stabilized. This is not a "winter" for the content industry itself, but rather the extinguishing of "false fire" upstream, which was previously fueled by a single system's strong capital and channel distribution advantages. However, both live-action and AI short-form dramas continue to show consumer resilience. With the removal of distribution channels and the relative clearing of supply, traffic will increasingly focus on top-tier, high-quality content, increasing LTV and returning to the content logic of "spending for good content."
Domestic and International Expansion Dynamics
Domestic content producers and traffic distributors are increasingly shifting to overseas markets. Platforms like Netshort demonstrate the potential of content. The overseas short-form drama market's IAP growth is slowing, with 1,170 apps active in May, intensifying competition. In this fiercely competitive environment, more players are entering less-developed regions with lower willingness to pay, using IAA models to unlock traffic value. Platforms like Netshort show late-mover advantages: starting in March, Netshort's in-app purchase revenue began to grow significantly, consistently ranking third in the industry with continued growth. Its parent company, Maiya Media, possesses dual capabilities in production and traffic distribution, excelling in efficiency. Content localization and vertical operational capabilities are key reasons for Netshort's late-stage success.
Exploring New Traffic Vehicles and AI Interactive Dramas
The industry continues to explore new vehicles for traffic distribution, with AI interactive dramas showing potential. The report outlines several key stages in the development of interactive film and gaming both domestically and internationally. Current AI interactive dramas on platforms like Tomato Novel differ significantly from traditional interactive film and games (e.g., "Shengshi Tianxia") in business model and product form. AI interactive dramas generally follow the linear narrative structure of novels and episodes, with an audience closer to web novel and short-form drama consumers. Successful overseas traffic distribution cases already exist. These dramas offer high ad-loading efficiency and also require more model consumption on the production side. Several leading domestic companies have already launched tool-based products for AI interactive content and introduced corresponding content incentive plans. The report views this as an extension attempt by traffic platforms and model companies based on their own business strategies, suggesting that AI interactive drama penetration on the consumer side is still in its early stages.
Risk Factors
AI model performance may fall short of expectations; commercialization may be slower than anticipated; platform policy adjustments; uncertainty in overseas expansion; and stricter content regulation.
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