According to Pacific Securities, the short drama industry is transitioning from unregulated growth to quality improvement as regulations become clearer. The trend toward premium content continues to drive demand-side expansion. Animated shorts, a form of short drama in animation, differ from live-action shorts in terms of audience demographics. With AI technology maturing, production costs and timelines for animated shorts are being optimized. Coupled with platform support policies, the sector's growth prospects are bright, potentially contributing incremental users to the short drama industry and emerging as a new growth driver. Companies with extensive IP reserves and AI video-generation capabilities are well-positioned. Stocks to watch include Bona Film Group (001330.SZ). Key insights from Pacific Securities are as follows:
**Supply-Demand Synergy Drives Growth; Short Drama Market Could Near ¥100B by 2025** China's short drama industry has expanded rapidly, with the market size reaching ¥50.5B in 2024 (DataEye). By 2025, it may approach ¥100B, nearly doubling year-on-year (Hongguo Short Drama). Regulatory clarity, including the "three-category, three-tier" review mechanism, is steering the industry toward quality over unchecked growth.
On the supply side, premiumization is evident as A-list actors join productions and platforms raise content standards. Demand-wise, user numbers exceed 600M, with negative perceptions of low-quality content fading. CSM data shows monthly users may stabilize at 600–700M in 2025 (vs. 300–500M in 2024), supported by supply-demand dynamics.
**Complementary Audiences: Animated Shorts as a New Growth Driver** Animated shorts adapt web novels, comics, or scripts into video format, blending static and full-motion animation. Unlike live-action shorts’ rapid emotional hooks, they allow slower narrative buildup and broader pacing tolerance. Live-action shorts dominate in romance, historical, and urban genres (female-skewed), while animated shorts focus on underdog, fantasy, and time-travel themes (male-skewed).
WETURE data shows 86% of animated short viewers in Q3 2025 were male, with 4.2% aged 30+. In contrast, CSM reports 51% of short drama users were female, and nearly 40% were over 50. This divergence suggests animated shorts can attract incremental users, boosting overall growth.
**AI + Platform Policies Fuel Sector Momentum** In H1 2025, 3,000 animated shorts launched (83% CAGR), with revenue up 12x, potentially exceeding ¥20B annually (Ocean Engine). Growth drivers include: 1) **Platform Support**: Major video platforms are offering IP access, funding, and traffic incentives. For example, Douyin opened 60K+ original IPs from Tomato Novels and allocated ¥200M+ for premium content procurement. 2) **AI Enablement**: AI streamlines scriptboarding, character design, and animation, slashing production costs from ¥30–50K/minute to ¥1–2.5K and cutting timelines from years to weeks (Short Drama Lab). AI also enables surreal themes (e.g., fantasy) hard to film live, diversifying content and revaluing literary IPs.
**Risks**: Tighter regulations, intensifying competition, and declining user willingness to pay.
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