China Entertainment_ Upsurge in short and mini dramas_ framing TAM, monetization and potential winners_losers

Industry and Company Overview * Industry: China Entertainment, specifically focusing on short and mini dramas. * Key Company: Hongguo Drama (ByteDance Group), a free short drama app. * Analyst Firm: Goldman Sachs China Entertainment. Key Points 1. Rapid Growth of Short and Mini Drama Industry: * The short and mini drama industry has experienced significant growth, with a TAM of RMB 50 billion in 2024E, surpassing the domestic box office of the movie industry. * The industry is expected to grow at a 22% CAGR from 2024 to 2027E, reaching RMB 91 billion by 2027E. * The format is gaining popularity due to its convenience, affordability, and diverse content offerings. 2. Monetization Model Shift: * The monetization model is shifting from In-App Purchase (IAP) to In-App Advertising (IAA), with IAA expected to account for 70% of total revenue by 2027E. * The freemium model, particularly with Hongguo Drama, is becoming increasingly popular, driven by its free access and ad-supported content. 3. Key Players and Value Chain: * Key players include short drama producers, advertising platforms (e.g., Douyin, Kuaishou, Tencent), and content producers/IP owners. * Advertising platforms, particularly Douyin and Kuaishou, are expected to benefit significantly from the rising short drama TAM and advertising spend. * Producers typically earn around 12% of total revenue, with the majority of revenue going to advertising platforms for marketing and user acquisition. 4. Overseas Opportunities: * The overseas short drama market is still in its early stages, with the US being the largest market. * The overseas TAM is expected to reach over US$10 billion with 200-300 million users in the future. * Challenges include enriching localized content offerings and improving profitability due to higher production costs in overseas regions. 5. Impact on Long-Form Video (LFV) Platforms: * The rise of short and mini dramas is gaining time share and may affect content consumption habits, potentially challenging LFV incumbents like IQ and Mango. * LFV platforms are increasingly introducing mini and short dramas to their content libraries to stay competitive. Potential Winners and Losers * Winners: * Advertising platforms (e.g., Douyin, Kuaishou, Tencent) * Short drama producers * Hongguo Drama (ByteDance Group) * Losers: * LFV platforms (e.g., IQ, Mango) * Traditional LFV producers