The overseas short drama sector is now entering a phase where profitability is being put to the test.
On August 25, Col Global Co., Ltd. released its semi-annual report for the first half of 2026. During this period, the company generated revenue of 578 million yuan, marking a 3.85% year-on-year increase. However, it posted a net loss attributable to shareholders of 43 million yuan, though this loss narrowed by 81.01% compared to the same period last year. In the second quarter alone, the company achieved a net profit attributable to shareholders of 2.83 million yuan, securing a quarterly turnaround to profitability.
The shift in the business structure is quite evident. Revenue from short dramas and IP derivatives reached 411 million yuan, a substantial 108.72% increase year-on-year, now accounting for over 70% of total revenue. In contrast, revenue from online literature and related businesses fell to 145 million yuan, a 54.91% decline. Notably, Col Global Co., Ltd.'s self-operated overseas short drama platform, FlareFlow, achieved monthly operating breakeven ahead of schedule.
This financial report serves as a representative example for the overseas short drama industry: both revenue growth and user scale have been established, yet profit margins remain exceptionally thin. The challenges confronting Col Global Co., Ltd. are the very questions the entire industry must now address.
Short dramas sustaining revenue, yet profits remain at a critical juncture
The semi-annual report reveals that Col Global Co., Ltd. has completed its strategic priority shift. Short dramas have become the primary revenue source, while its traditional online literature business has contracted notably. Alongside this revenue structure transition, the quality of profitability is also improving. In the first half of the year, the company's overall gross margin stood at 49.58%, up 17.71 percentage points year-on-year, with net cash flow from operating activities reaching 127 million yuan.
However, the improvement in gross margin has not yet translated into stable profits. The company still recorded a loss of 43 million yuan in the first half, and second-quarter profitability was only 2.83 million yuan. Revenue from Hong Kong, Macau, Taiwan, and overseas regions amounted to 278 million yuan, representing 48.03% of total revenue. While overseas business accounts for nearly half of the company's revenue, it is still insufficient to reverse the overall loss position.
Within this context of an unstable profit foundation, FlareFlow stands out as the most encouraging signal in this report. The platform's cumulative registered users have surpassed 52 million, covering over 200 countries and regions worldwide. It has launched nearly 7,000 drama titles, with AI-generated content accounting for more than 10%. Achieving monthly operating breakeven indicates that the platform is beginning to find a balance between user acquisition spending, content investment, and monetization. Yet, registered users do not equal paying users, and a single month of breakeven can easily be reversed. Rising user acquisition costs, gaps in hit content, and escalating localization expenses could all adversely affect the income statement. FlareFlow needs to demonstrate consistent profitability over several consecutive quarters to prove its viability.
Col Global Co., Ltd.'s overseas assets also involve a more complex issue. Maple Interactive, the parent company of ReelShort, was once a controlled subsidiary of Col Global Co., Ltd. In 2023, Col Global Co., Ltd. handed over operational control to the management team, and Maple Interactive was subsequently removed from its consolidated financial statements. Although no longer consolidated, Col Global Co., Ltd. still retains approximately 49% equity in Maple Interactive.
In May of this year, Maple Interactive filed a lawsuit against Col Global Co., Ltd. in a U.S. court, seeking a declaration that the relevant governance agreements are invalid. Maple Interactive contends that Col Global Co., Ltd.'s self-operated FlareFlow platform directly competes with ReelShort. In response, Col Global Co., Ltd. maintains that the agreements hold legal binding force. The conflict lies precisely here. Col Global Co., Ltd. is a significant shareholder of Maple Interactive while simultaneously operating a competing platform, FlareFlow, overseas. Since both platforms target overseas short drama users, their content and user acquisition strategies overlap significantly. This clash between the equity investment and self-operated business not only affects market valuations of Col Global Co., Ltd.'s overseas assets and its own profit statement but also diverts management's attention and energy.
Massive revenue flows, yet razor-thin profits
Let's first examine the industry landscape. According to Sensor Tower statistics, in the first quarter of 2026, global short drama app downloads exceeded 850 million, with in-app purchase revenue reaching approximately 750 million U.S. dollars — the market continues to grow. However, DataEye-ADX data indicates that the number of overseas short drama platforms has surged from around 100 to approximately 400 within just one year, meaning competition is growing even faster. With more platforms entering the fray, traffic costs are being driven upward, and user attention is becoming more fragmented. The result is that while growth dividends still exist, they come at the price of increasingly higher user acquisition expenses.
To sustain growth, short drama companies have no choice but to escalate their marketing spend. Col Global Co., Ltd.'s total selling expenses for the first half of 2026 reached 254 million yuan, accounting for approximately 44% of its revenue. In 2025, the company's selling expenses totaled 953 million yuan, representing 57.54% of revenue, with promotion fees alone reaching 759 million yuan. In its 2025 annual report, the company explained that the increase in selling expenses was primarily related to overseas business promotion. Revenue scale has expanded, but profits are being siphoned off first by traffic platforms before reaching the content providers.
Even Maple Interactive, the parent company of ReelShort, reported 2025 revenue of 5.721 billion yuan but suffered a net loss of 85.8378 million yuan. High revenue has not translated into high profits, reflecting the pressures of business expansion and heavy investment. With user acquisition costs proving difficult to reduce, platforms are turning to AI to optimize content production costs. Col Global Co., Ltd. has disclosed that its AI production system has reduced overall production costs by 80% to 90% compared to traditional live-action dramas. Per-episode production time has been shortened, and scenes, props, and character assets can be reused across productions.
For an individual platform, this represents efficiency gains. However, AI is not an exclusive tool for any single platform. As more platforms adopt AI, the rapid improvement in production efficiency will quickly lead to an oversupply of content. DataEye data shows that in the first half of 2026, overseas micro-drama app downloads reached approximately 1.441 billion, a 79% year-on-year increase, while in-app purchase revenue reached approximately 1.27 billion U.S. dollars, up only about 13% year-on-year. During the same period, cumulative advertising creatives for overseas short dramas reached approximately 19.61 million, a 324% year-on-year surge, with 38,722 new titles launched in June alone.
These figures point to a significant shift: the growth rates of content supply and advertising spending have clearly outpaced the growth rate of in-app purchase revenue. The underlying reason is that AI can solve efficiency problems on the "production side," but it cannot solve the problems of "creativity" and "attention allocation," both of which are the true keys to creating hit content. After production costs decline, the same budget can be used to launch more new dramas and produce more advertising creatives to compete for users. The result is a rapid increase in content supply and ad impressions, driving up downloads and clicks, but paying conversion rates fail to keep pace. When all platforms adopt this approach, the attention and revenue that each individual drama can capture becomes diluted. The production savings platforms achieve through AI ultimately get reinvested into even more content and more advertising, meaning customer acquisition costs and trial-and-error expenses remain extremely high.
Beyond the cost side, the regional mix is also compressing profit margins. According to Sensor Tower statistics, in the first quarter of 2026, Southeast Asia, Latin America, and India together contributed approximately 77% of global short drama app downloads, yet users in these markets have limited spending capacity. North America represents a different type of market: users there show strong willingness to pay, but customer acquisition costs are also high. DataEye-ADX data shows that in March 2026, the single-user customer acquisition cost for short dramas in North America had already reached approximately 5.28 U.S. dollars. This creates a structural contradiction: markets with high download volumes tend to have low average revenue per user and low payment conversion rates, while markets with strong spending power come with prohibitively high acquisition costs.
Complicating matters further, different markets have entirely different languages, cultures, payment habits, and channel structures. Southeast Asia suits a model combining free content with advertising and low-price hybrid offerings; Latin America requires Spanish and Portuguese localization; India is highly price-sensitive; and Japan and South Korea demand higher production quality and better acting. Even in North America, where users are more willing to pay, high acquisition costs are squeezing profits. Therefore, overseas short drama expansion cannot rely on a single set of creatives and one payment model for the entire globe. Regional selection itself is a profit decision. Some platforms show rapid growth in downloads and revenue, but if they concentrate on low-spending markets and rely on heavy advertising to gain scale, the larger they grow, the bigger their losses may become. This is the reality of the overseas short drama market: massive revenue flows, yet razor-thin profits.
The next phase is about sustainable profitability
Consequently, the overseas short drama industry can no longer rely on indiscriminate volume expansion. The next stage of competition will center on three key areas: improving content hit rates, reducing dependence on a single customer acquisition channel, and validating profit models across multiple markets.
The value of AI lies first and foremost in improving hit rates, not just in reducing costs. Col Global Co., Ltd. boasts a digital content resource library of 5.6 million titles and over 4 million registered authors. Its overseas online literature platform, RocNovel, can first validate stories through reading engagement, payment behavior, and advertising data before adapting high-potential IPs into short dramas for FlareFlow. FlareFlow then uses lightweight content to test different themes and decides whether to increase investment based on user feedback. This logic of validation is more important than simply producing more dramas. Possessing 5.6 million content titles does not mean having 5.6 million hits; the real capability lies in selection, adaptation, and rapid testing. AI can create multiple versions of a single story, test user responses across different regions, and then concentrate resources on content that performs well. Without an IP library and data feedback loops, AI will only accelerate the production of more content that nobody watches.
Distribution channels also need to evolve. FlareFlow is already expanding into smart TVs, in-car entertainment systems, overseas telecommunications operators, and streaming platforms, while simultaneously advancing localized content for markets like South Korea and Japan. The significance of these channels lies in reducing dependence on app store install ads. If short drama platforms rely solely on Meta, TikTok, and Google advertising for customer acquisition, their costs will remain perpetually controlled by traffic platforms. Smart TVs, telecom operators, streaming services, and local channels can provide more stable entry points and also improve user retention. Future distribution capabilities will encompass not just advertising but also the ability to integrate into local home entertainment systems and establish long-term partnerships with local channels.
2026 is set to be the year that validates profitability for overseas short dramas. Media Partners Asia projects that ReelShort's 2026 revenue could reach 1.05 billion U.S. dollars, achieving its first large-scale profitability. FlareFlow has also crossed the monthly operating breakeven threshold. This indicates that leading platforms are shifting from chasing users to pursuing profits. The pressure on smaller and mid-sized platforms will be even greater. User acquisition costs, content expenses, and localization costs are all rising, while AI has lowered the barriers to entry. New players can launch products quickly, but they will struggle to sustain access to cheap traffic or consistently produce hit content. Platforms without sufficient financial strength will be eliminated during this round of profitability validation.
Ultimately, the companies that survive will need to possess a combination of IP reserves, AI production systems, multi-channel distribution capabilities, and financial resources. They must be able to connect online literature, short dramas, advertising, and user data into a cohesive ecosystem, monetize through different models across various markets, and withstand months-long gaps between hit productions. Downloads and revenue for overseas short dramas will continue to grow, but these two metrics are no longer sufficient measures of success. Going forward, the market will be watching who can convert revenue into profit, who can continue being profitable month after month, and who can replicate success from a single market across multiple markets.
Comments