Core Viewpoint - Kuaishou has officially shut down its short drama mini-programs due to tightening regulations and a shift in user preference from paid to free short dramas [3][4][5]. Regulatory Environment - The tightening of regulations is highlighted by the State Administration of Radio and Television's announcement requiring all micro-dramas to have a distribution license or registration before airing [9]. - Kuaishou has taken measures to address violations, including removing over 100 micro-dramas and reporting serious violations to a blacklist [6][9]. Business Model Shift - Kuaishou's previous focus on paid short dramas through its mini-programs has shifted as free short dramas have gained popularity, with the market share of free dramas rising from 11% in January 2024 to 50% by October 2024 [11][13]. - The paid short drama model has seen a decline, with daily views dropping from 75 million to 60 million [14]. User Engagement and Performance - Kuaishou's average daily active users reached 408 million in Q1 2025, marking a historical high, with users spending an average of 133.8 minutes daily on the app [16]. - The marketing expenditure in the short drama sector has increased significantly, enhancing content value and user engagement [17]. Focus on AI Development - Kuaishou is now prioritizing its Keling AI initiative, which generated 150 million yuan in revenue in Q1 2025, with a significant portion coming from paid subscriptions by professional users [19]. - The company has established API services for over 10,000 businesses across various industries, indicating a strategic pivot towards AI and professional user engagement [19].

Core Insights - The user base for micro-short dramas in China is projected to reach 662 million by December 2024, accounting for 59.7% of the total internet users, with a market size of 50.4 billion yuan, surpassing the total box office revenue for films in the same year [2][11]. Group 1: Industry Developments - Kuaishou has announced the shutdown of its short drama mini-program, confirming the decision through internal communications [3][6]. - This is not Kuaishou's first action against the short drama category, as it previously removed nearly 100 non-compliant micro-short dramas and over 150 accounts for violations in May and June [5][6]. - The rationale behind Kuaishou's decision to close the mini-program is attributed to the rise of free short dramas and the decline of paid options, aiming for content quality improvement and specialized operation in the short drama ecosystem [6]. Group 2: Competitive Landscape - Tencent has launched its own short drama mini-programs, including "Mars Watch Drama" and a new "Short Drama" program, emphasizing free access to high-quality content [7][10]. - Tencent's strategy includes leveraging its vast user base on WeChat to facilitate social sharing and content discovery, aiming to capture market share in the competitive short drama space [10]. - The partnership with the reading group, which plans to upgrade its short drama offerings, provides Tencent with a wealth of quality story materials, enhancing its competitive edge [10]. Group 3: User Behavior and Preferences - A survey in Ningbo revealed that 81.15% of respondents have watched short dramas, with average daily viewing times concentrated between 10-30 minutes, indicating a preference for consuming content during fragmented time [12]. - Approximately 31% of respondents have paid for short drama content, with average monthly spending between 10-50 yuan, highlighting a willingness to invest in quality content [14]. - The core audience for short dramas primarily consists of Generation Z and working professionals, who value content quality and innovation, steering clear of low-quality, homogeneous offerings [14].

Core Viewpoint - The paid mini-program short drama model is declining, with major shifts in the short drama market towards ad-supported models. Group 1: Market Changes - Kuaishou will shut down its short drama mini-program on June 17, 2024, marking a significant shift in its strategy [2] - The industry is transitioning from the In-App Purchase (IAP) model to the In-App Advertising (IAA) model, with IAA's market share rising from 11% in January 2024 to 50% by October 2024 [3] - ByteDance's Hongguo short drama has emerged as a major player, achieving 173 million monthly active users in March 2024, a 220.28% year-on-year increase [3] Group 2: Business Model Evolution - The IAP model, which allowed users to pay to unlock episodes, is being replaced by the IAA model, which offers free viewing supported by ads [3] - Kuaishou is shifting focus to native accounts on platforms like Douyin and Kuaishou, where users can pay to watch without needing to switch applications [4] Group 3: Regulatory Environment - The short drama industry is entering a "strict regulation" phase, with new policies from the National Radio and Television Administration prohibiting the promotion of unlicensed content [5] - Kuaishou has recently removed over 100 non-compliant short dramas and reported serious violations to a blacklist, indicating a commitment to stricter content oversight [5]