At present, the short play market is hot. We estimate that the paid income of short plays will exceed 20 billion yuan in 2023. Short plays going to sea is also the main direction in the future. It is expected that overseas film and television companies and streaming media platforms may also join the short play blue ocean market.
The competitive advantage of domestic manufacturers is that they have rich experience in short drama production and streaming, and the speed of setting up overseas short drama shooting teams and responding to hot content is more agile, which is expected to seize users’ minds and market share in the early stage of industry start-up. The emerging mini-drama complements and perfects the existing video ecology in two dimensions: content form and distribution link, and there is a huge blue ocean market to be explored at home and abroad.
Source: New Fortune Magazine (ID: xcf Plus)
Author: Kuang Shi (chief analyst of GF Securities Media Internet) Xu Chengjuan (senior analyst of GF Securities Media Internet)
01
Estimation of the market size of short plays
According to the data of flying melon, the huge engine predicts that the short play market will consume 20 billion yuan in 2023. According to the hot cloud data, the average return on investment (ROI) of the short play industry is about 1.1, so we expect that the paid income of short plays will exceed 20 billion yuan in 2023.
The scale of sub-account income of short plays is expected to be less than 1 billion yuan. According to De Tawen, in the first half of 2023, there were 481 mini-dramas launched on domestic long and short video platforms, with 100 mini-dramas launched on Tencent Video, Youku, Mango TV, iQiyi, Tik Tok and Aauto Quicker, 72, 28, 7, 212 and 68 respectively. According to Yunhe’s data, in the first half of 2023, among the micro-short dramas launched online, the sub-accounts of "Provoking" and "Locking Love" exceeded 10 million yuan, and the sub-accounts of 30 short dramas exceeded 1 million yuan. Assuming that the average sub-accounts of the remaining 451 short dramas were 500,000 yuan each, the sub-accounts revenue of micro-short dramas in the first half of 2023 totaled about 360 million yuan. We expect that in 2023,
The market scale of small program short plays has grown rapidly, surpassing the fast-shaking short plays and long-video short plays that have been developed for many years. The main reason is that the "Tik Tok+Jump Payment" mode of small program short plays has a stronger spread in the information flow algorithm and a better user experience than the mode of fast-shaking short plays with promotion and payment at the end. In the diversion dimension, the completion rate of paid video is naturally low, and based on the algorithm, its propagation radius in the short video platform is small.
In the second half of 2022, Tik Tok opened a link of "massive star map purchase → Tik Tok platform diversion → jumping to WeChat applet → paying to watch short plays". Through a large number of film and television experts on Tik Tok platform, the eye-catching plot of short plays of small programs was edited into short video material and put in Tik Tok station. The broadcast effect of the material was good, the reach radius was wide, and the delivery link settled by CPS was accurate. In the dimension of user experience, if you insert video content that needs to be paid to watch completely in the information stream, or directly mount paid short plays, it will hurt the feelings of short video users who are used to free use to some extent, while short plays with small programs need to jump to small programs before entering the payment link, which separates free users on the short video platform from potential users with strong willingness to pay, effectively reducing the bad review rate of talent accounts and streaming materials.
The key miniseries in Tik Tok, Aauto Quicker and long video platforms must pass the content review of the radio and television administrative departments and obtain the Network Drama Distribution License. At present, the small program miniseries are mainly self-reviewed by WeChat and Tik Tok platforms, with a short review period and relatively loose scale.
02
Discussion on the future business model of short play: free VS payment
At present, the main profit model of small program short plays is pay-per-view, and the industry dilemma lies in the low profit level. According to the report of Whale Platform, the single episode of small program short play lasts about 1-2 minutes, the price of single episode ranges from a few cents to 3 yuan per episode, and the delivery cost accounts for about 80%-90% of the total paid income. The production cost of a single short play ranges from 100,000 yuan to millions of yuan, and then the technical service fee of the platform is deducted (for example, WeChat small program charges 10% technical service fee and gives back 6% incentive advertising fee).
The overall profit rate of small program short plays is low, the core reason is that the content of short plays is extremely homogeneous at present, and the product competition is concentrated in the delivery end, which leads to the average ROI of investment rolling up to about 1.1. According to our statistics, from January 1st to November 5th, 2023, the short dramas on the list in Tik Tok’s short program drama explosion weekly list accounted for 34% of the theme of "God of War". The solution to the low profit rate of small programs and short plays is to create differentiated competition through short play content and attract users to pay by virtue of outstanding content quality; The second is to accumulate loyal users through the supply of large-scale short plays and private domains such as APP, community and small programs, so as to improve the stickiness and repurchase rate of platform users and reduce the demand for purchases.
Figure 1: The value industrial chain structure of small programs and short plays
Source: WeChat Advertising Assistant, Reyun Data, Guangfa Securities Development Research Center.
From the perspective of market demand, compared with the content form and distribution link of long videos, short plays have the advantages of short episodes and fast plot rhythm, which are more suitable for the fragmented and exciting entertainment needs of contemporary netizens; and the production threshold is lower, the content supply is more huge, and Tik Tok and other streaming channels are superimposed, so that accurate distribution can be realized according to user tags. Therefore, we judge that after the quantity and quality of content supply in short drama industry are upgraded, there is still much room for further growth in market scale. On the one hand, we can gain new users in the sinking market and increase the viewing frequency, on the other hand, we can gain the fast-paced demand of some users on the long video platform.
From the perspective of business model, the scale effect of three business models, namely, payment on demand, membership subscription and free viewing of advertisements, is increasing. It is expected that the short play industry is similar to the online reading industry, and the free mode will eventually win most of the market share. At the same time, the scale effect of the free model is very strong, and we expect the platform to be highly centralized. Paid short plays will still occupy a certain market share with differentiated high-quality content. The core competitiveness is the content quality of short plays, and the market structure is expected to be relatively dispersed.
There is still some potential market space for short plays. According to the "Data Value Report of Aauto Quicker Short Plays in 2022" compiled by the magnetic engine, in 2021, the number of users who have seen Aauto Quicker short plays in China has exceeded 1 billion; According to people’s entertainment reports, as of July 2022, the daily users of short plays in Aauto Quicker reached 260 million. According to the report of the Capital Radio and Television Program Producers Association, the number of paid daily users (DAU) of mini-mini-dramas has exceeded 10 million. Assuming that the monthly paid users of short plays are divided into 0.3, 0.6, 0.9, 120 and 150 million, and the average user income (ARPU) is 50 yuan/month/person, the annual paid income of the corresponding short plays is 180, 360, 540, 72 and 90 billion yuan. Assuming that the daily users of free short plays are 1.0, 1.3, 1.7, 250 and 330 million, and the average advertising revenue generated by a single DAU is 0.7 yuan/day/person, the annual advertising revenue of the corresponding short plays is 256, 319, 426, 639 and 852 million yuan. According to LatePost, the revenue of tomato novels exceeds 10 billion yuan. According to QuestMobile, the average DAU of tomato novels in 2022 is 61.82 million, and the average advertising revenue achieved by a single DAU is about 0.44 yuan/day/person. Considering the short play content, the advertising forms that can be inserted are more diverse than the text content, and the advertising value is higher. However, it is expected that the free mode will seize most of the short drama users’ time, leading to a decline in the overall payment rate of the short drama industry.
03
There are many short plays, and the online platform presents a first-Mover advantage.
This year’s explosive small program short play market and low production threshold attracted a large number of players. At present, there are mainly the following participants in the short drama industry.
The first is the web platform. This kind of participants have two competitive advantages. One is that the IP of the reserved web text can be adapted into short plays, which are highly coincident in terms of user portraits, cool content and so on. The other is that the mature web text investment or distribution link can be reused with small programs and short plays. Due to the resource endowment of the online platform at both ends of copyright and distribution, it is the main player in the short play market of small programs at this stage. According to the huge amount of engine data cited by Whale Platform, from the fourth quarter of 2022 to the third quarter of 2023, the number of short drama copyright owners increased from 41 to 150, of which online literature accounted for 48%. At present, Dianzhong and Kyushu, which are in the first echelon of the small program short play industry, both started as online platforms, accounting for 18% and 15% of the explosion of small program short plays in Tik Tok this year respectively.
The second is the marketing company. The competitive advantages of such participants are: first, they have mature experience in content marketing and streaming; second, they can integrate talents, brand advertisers, e-commerce and other resources in the system, extend the realization chain of short plays, and obtain incremental benefits through online celebrity incubation, advertising placement, live broadcast and delivery.
The third is the film and television company. The competitive advantages of such participants are rich film and television resources and professional drama production ability. With the improvement of industry supervision and the upgrading of users’ aesthetics, the production threshold of small programs and short plays will be improved as a whole, and the quality of content will become a more critical core competitiveness. We judge that film and television companies will become the main players in the short play market in the next stage.
The fourth is the state-owned enterprise of radio and television department. The competitive advantage of this kind of participants is that they have the License of Audio-visual Program for Information Network Communication and related film and television resources.
In addition, many game companies, social platforms, e-commerce companies, comic platforms, etc. are entering the short drama track by virtue of their competitiveness in content production and investment.
Figure 2: Number of times in Tik Tok’s short program and short drama explosion weekly list from January 1, 2023 to November 5, 2023 (times)
Source: Tik Tok, Guangfa Securities Development Research Center.
04
Radio and television, small programs and short plays move towards standardized review
In view of the censorship policy of short plays, short and long video platforms have been brought into the standardized management of radio and television administrative departments, and it is necessary to review the contents of the radio and television administrative departments and obtain the Network Drama Distribution License, or complete the filing of online audio-visual programs in accordance with the relevant regulations on the management of network dramas. At present, platforms such as Tik Tok and WeChat are responsible for the censorship of short plays. On the whole, the content review scale of small program platform is relatively looser than that of radio and television management department, and some small program short plays contain industry chaos such as bad value orientation and vulgar edging. On the one hand, the radio and television management department encourages the industry to develop continuously, on the other hand, it accelerates the improvement of management mechanism and tightens the efforts to control illegal content.
On November 15th, 2023, the State Administration of Radio, Film and Television once again launched a one-month special rectification work, focusing on the orientation, title, content, aesthetics, personnel, publicity, broadcasting and other aspects of online mini-dramas, increasing the disposal of illegal online mini-dramas, and improving the review mechanism of advertising promotion. Subsequently, Tik Tok, WeChat, Aauto Quicker and other platforms have issued disposal announcements. Tik Tok recently removed 119 micro-short plays that violated regulations in small programs and disposed of 1188 Tik Tok accounts that illegally promoted micro-short plays; Aauto Quicker removed more than 10 illegal mini-dramas, and punished 13 accounts that posted illegal content according to the degree of violation. In the future, the State Administration of Radio, Film and Television plans to formulate "Detailed Rules for the Creation, Production and Content Audit of Internet Miniature Plays" to promote the inclusion of Internet Miniature Plays APP and applets in daily institutional management.
We judge that the content review requirements of small program short plays in terms of film title, theme, plot, aesthetics, personnel, etc. will gradually be in line with the network short plays of long and short video platforms, especially for key short plays with certain influence or popularity. Previously, the industry chaos that some small programs and short plays attract users through vulgar and eye-catching plots will eventually be completely managed, and the content competition will turn to the production and development capabilities of dramas under the compliance framework. Finally, the network micro-short drama APP and small programs will be included in the daily institutional management under the radio and television system.
05
Short Play Going to Sea: Blue Ocean Market, which is expected to create a leading vertical APP.
Short drama APP is a new "top stream" for China’s application to the sea. According to data.ai Intelligence data, short drama manufacturers began to try to enter the overseas market in 2022. As the head product ReelShort accelerated the launch of local original short dramas and increased the scale of launch, the overseas downloads of short drama apps began to explode in June 2023. From July to October, the overseas monthly downloads of short drama apps remained above 2 million.
As a kind of short video content, short plays have both short and compact narrative rhythm and continuous plot development. When short plays go to sea, users have lower understanding threshold, stronger audio-visual experience, and it is easier to build a production system that specializes in producing content (PGC) overseas. Therefore, we expect that short plays will go to sea more easily than long video platforms and web platforms.
Figure 3: Overseas monthly downloads of popular short drama apps go by.
Data source: data.ai Intelligence, Guangfa Securities Development Research Center.
Similar to the current situation of the domestic short drama industry, the current short drama participants are mainly online text manufacturers, game companies, marketing companies and video platforms with overseas experience. Among them, online text manufacturers have also seized the leading position in the overseas short drama market by virtue of their rich IP reserves, domestic short drama production experience, overseas investment ability and user accumulation. It is expected that overseas film and television companies and streaming media platforms may also join the short drama blue ocean market in the future. The competitive advantage of domestic manufacturers lies in their rich experience in short drama production and streaming, and their ability to form overseas short drama shooting teams and respond to hot content is more agile, which is expected to seize users’ minds and market share at the initial stage of industry start-up.
From the perspective of ReelShort’s starting path, the core driving force is the content of explosive short plays and the scale of delivery. According to the little data, the download volume and income of ReelShort increased significantly in July, the end of August and the end of October this year, corresponding to ReelShort’s launch of explosive short plays "Fated to My Forbidden Alpha" and "The Double Life of My Billionaire Hubband" in June. On August 28th, the short drama "Goodbye, My CEO" was launched, and on October 21st, the short drama "I Got Married Without You" was launched. At the same time, according to APPgrowing, ReelShort’s launch scale has increased synchronously around the above time point. ReelShort’s distribution channel is mainly Meta-system. According to APPgrowing, the delivery channels of ReelShort this year accounted for 25%, 25%, 24% and 24% respectively.
06
Investment direction: There is a huge blue ocean market to be explored at home and abroad.
The emerging short play of small programs complements and perfects the existing video ecology in two dimensions: content form and distribution link, and there is a huge blue ocean market to be explored at home and abroad. In China, the paid income of small programs and short plays is expected to exceed 20 billion yuan this year, and it still maintains a relatively fast growth rate, but the overall profit rate is low due to the relatively low content quality and fierce competition at the delivery end. The State Administration of Radio, Film and Television has begun to tighten the content review. It is expected that the overall quality, matching user range and profit level of short plays will be significantly improved after the clearing of the industry and the entry of professional production institutions. It is judged that the business model of short plays in the future will be paid and free. The core competitiveness of the free short play platform is the user scale and will occupy the main market share, and the core competitiveness of paid short plays is the differentiated high-quality content. Overseas, a large number of short drama apps have been launched and their rankings have risen rapidly. At present, the estimated revenue of ReelShort, the leading product, has exceeded US$ 20.51 million so far this year, and the overseas short drama market is still in the stage of large-scale content capacity building and user cultivation.
At present, the head short video platform’s support for short drama content at home and abroad and its extension to the production of short drama content deserve special attention. Pay attention to reading companies with rich IP and high synergy with short drama format; In addition, based on rich experience in content production, some film and television or game companies will release their production capacity and competitive advantage in the next stage, and they can pay attention to the stimulation of the emergence of explosive works on industrial development. At the same time, the content output cycle of short drama industry is short, and the iteration is fast. Marketing announcement is an important help for product breakthrough. With more short drama platforms and content going out to sea in 2024, it is expected that the marketing budget will also increase at a high speed. Paying attention to marketing companies with content marketing and going out to sea will extend the realization chain of short drama content.
However, at present, the short drama industry still needs to pay attention to four major risks. First, the State Administration of Radio, Film and Television has tightened its censorship policy on small programs and short plays; Second, the intensified competition in the industry has further reduced the profit rate; Third, the uncertainty of the income of short drama projects; Fourth, the progress and performance of short drama business of listed companies are less than expected.
Any information and information mentioned in this article is only the expression of the author’s personal views or the statement of specific events, and does not constitute recommendation and investment advice, and does not represent the position of the society. Investors should bear the risks and consequences of investing accordingly.
