A new generation of AI tools has turned China's short animated-drama industry into an industrial-scale production line, but the rush to automate is colliding with economics. The launch of Seedance 2.0 and similar releases has dramatically raised usable output—platforms claim 15‑second assets can reach 90% usability—and production costs have fallen to as little as RMB 500–1,000 per minute. That technical leap has provoked a supply surge: by late 2025 over 100,000 short “manju” titles appeared on Douyin alone and daily platform spending peaked at RMB 30m for a single ecosystem. The immediate consequence is obvious and brutal: the likelihood that any single title becomes a breakout hit (the industry’s so‑called “抽卡率” or hit rate) has plunged below 5% for many players and even top teams now report hit rates only around 13%.
The market’s macro numbers still look spectacular. Analysts project the AI short‑drama segment to grow from RMB 190bn in 2025 to over RMB 240bn in 2026, sustaining growth above 40%. Yet those headline figures mask a deeper realignment: capital and distribution are concentrating around firms that control core IP, platform pipelines or full “industrialised” production stacks. Major internet groups and legacy studios—Baidu, Tencent, ByteDance and veteran animation houses—are rolling out dedicated apps, channels and incentive schemes to secure supply and steer monetisation. For smaller teams, the combination of cheaper tools and overflowing output means fierce price pressure and narrowing survival margins.
Industry executives at a recent closed‑door salon convened by NetEase framed the shift as a transition from an early wild‑growth phase to a quality‑focused “deep water” era. The conversation moved from how cheaply something can be produced to how enduring value is created: IP that can be merchandised, licensed into games, or extended across formats. One executive emphasised the Disney model—most revenue comes from derivatives and licensing, not single titles—and warned that if producers remain stuck in “short drama = traffic” thinking, the business will remain one‑off fast consumption. Platforms are responding by opening IP libraries, offering traffic guarantees, and running contests and partner programmes to help promising projects scale beyond single plays.
That reorientation reshapes who is valuable in the production chain. Participants agreed that AI will replace repetitive craft—frame compositing, routine VFX, bulk voice generation—but cannot yet replicate high‑order aesthetic judgment or the emotional subtlety of a skilled director. The new scarce talent mix includes people who can architect production ecosystems: writers who think IP, producers who manage pipelines, and directors who can marshal AI to reach a refined “90‑point” aesthetic. Firms that merely master a model or a tool will find their edge transient; long‑term moats will be built by teams that integrate storytelling, rights management and platform distribution.
Commercially, players are already chasing several second‑wave opportunities. Interactive drama, where viewers shape narrative outcomes, is widely flagged as the next growth node because it escapes pure passive consumption and raises engagement—and therefore monetisation—potential. Overseas distribution is presented as another clear play: by combining China’s advanced AI toolchain with lower production wages in Southeast Asia, creators can arbitrage costs and harvest high ad returns from platforms like YouTube. Meanwhile, brand‑sponsored B2B commissions are emerging as a pragmatic revenue anchor; brands see AI short drama as a cost‑efficient, low‑risk marketing channel that avoids celebrity‑led reputational volatility.
The broader implication is a bifurcation of the industry: a commoditised mass market that competes on price and volume, and a premium tier where deep IP and production craft command disproportionate returns. For policymakers and rights holders, the shift raises familiar questions about copyright, platform power and labour displacement. For international audiences and advertisers, it signals both a flood of low‑cost content suitable for global distribution and an increasing need to identify formats and creators capable of sustainable cross‑border value extraction. The short‑term outlook is one of consolidation and culling: the “picking up money” phase is over and the next winners will be those that convert AI-driven throughput into durable, expandable assets.