Quickly use Douwei to grab the "dominant boss"

This year, short dramas are really popular. However, the chaos hidden under the popularity of short dramas has attracted the attention of regulators and rectification work has been carried out. Major short video platforms have also increased their supervision. As the industry gradually moves towards standardization and order, which major platform will be able to seize more market share? Let us look forward to it together!

"I spent more than 300 yuan in two days and watched more than 30 30-second advertisements in one night." Recently, a blogger complained that he was "cheated" by the short drama.

Like this blogger, there are many viewers who are addicted to short dramas. With their help, since September this year, the "battle reports" released by the mini-program short dramas have frequently been popular in the circle of friends. The recharge amount of "Wushuang" exceeded 100 million in 8 days, and the recharge amount of "Oh! The Queen Comes to Work" exceeded 12 million yuan in 24 hours after its launch...

However, behind the frequent screen appearances of the "bosses", most short drama companies are not as profitable as the public imagines, and the beautiful "battle report" numbers do not represent real profits.

Behind this feast of traffic, the ones who are truly "making money in silence" are three platforms.

There are traffic platforms represented by Kuaishou and Douyin. Mini-program short dramas often place information flow ads on such channels to attract users to jump to the mini-programs and pay to watch the dramas. It is generally said in the industry that 90% of the production cost of a short drama is used to buy traffic.

There is also WeChat, the largest carrier supporting mini-program dramas. Not only has the WeChat mini-program technical channel fee (the handling fee for short drama recharge and withdrawal) increased from 1% of the recharge flow to 10%, but WeChat Video Account is also one of the main traffic channels for short drama companies.

In fact, Kuaishou and Douyin have long tried short dramas in a broader sense. At that time, short dramas were equivalent to high-quality situational short dramas, which were guaranteed by the platform and shared by the creators. Users rarely paid directly. Short dramas provided the platform with user time value and short drama talent incubation value.

Until this year, the mini-program short dramas paid for directly by users became popular, and Douyin and Kuaishou began to "eat both ends", earning investment fees from the outside, and developing short drama mini-programs on the site, and launching independent short drama apps. As for the original boutique short dramas of Douyin and Kuaishou, they are still retained and monetized by brand-customized short dramas.

However, the chaos caused by the popularity of mini-program short dramas has attracted the attention of regulators. Relevant departments have launched a special rectification campaign for online micro-short dramas. Major short video platforms have also removed a large number of illegal micro-short dramas and begun to increase the intensity of review of short drama releases.

As the industry gradually moves towards standardization and order, which one will seize more market share between Douyin, Kuaishou and WeChat? Who will win this battle? The market is waiting for the answer.

1. External: Short dramas are invested in streaming, giving money to Kuaishou, Douyin and Weibo

When it comes to mini-program short dramas, many people think that this is a content-driven market that belongs to the category of film and television dramas. In fact, this is inseparable from the traffic team.

The teams that have the most rapid growth in mini-program short dramas are all teams that previously did novel CPS (distribution), such as Jiuzhou and Liangliang. "They initially shot short dramas to be used as materials for novels. At that time, Douyin opened a link to WeChat, and they put short drama content slice ads on Douyin. Users jumped to the WeChat mini-program to pay, and the link was smooth, so it exploded all of a sudden." Titan, an investor who has been studying the short drama market for a long time, said.

Because of this, the main distribution channels for mini-program short dramas are similar to the CPS channels for novels. Among them, the most important are short video platforms, such as Douyin, Kuaishou and Video Accounts; followed by graphic information streams and online literature platforms, such as Toutiao, Baidu, and Tomato Novels.

The gross profit of a single short drama is generally 8%-13%, and the cost of buying traffic accounts for more than 90% of the operating costs. "The short drama industry seems to be profitable, but in fact all the money goes to the traffic platform." Titan said.

The short drama industry also has to buy traffic. If we use the logic of skin-changing mini-games and information flow advertising to look at the short drama industry of mini-programs, it is easy to understand - the stickiness of short drama users is not high, and they must rely on traffic investment. In the entire industry chain, the bulk of the funds are earned by traffic platforms such as short videos, and the short drama industry plays a game of buying traffic. "The success rate and conversion rate of traffic investment are the key to determining the income of short dramas." said Li Yunming, director of the production and distribution department of Xinju Entertainment.

The traffic cost of many mini-program short dramas is several times the production cost. Li Yunming once spent less than 100,000 yuan to produce a hit short drama, and the recharge flow reached 16 million yuan, of which the traffic cost accounted for more than 10 million yuan.

It is reported that the core life cycle of most short dramas is only half a month, and they need to start to increase in volume immediately when they are released. Specifically, after a short drama is released, the investment company will first spend 5,000 yuan to test the traffic on platforms such as Douyin and Kuaishou. When the ROI (return on investment) is 1.18-1.2, it will continue to invest in traffic. The best comprehensive ROI in the industry can reach 1.7-1.8. However, as the industry involution, the number of hot products has gradually decreased, and the ROI has also gradually decreased.

There are a large number of investment companies in the market. Currently, the short drama track generally recognizes Douyin's huge engine. Many interviewees said that this is related to the fact that the huge engine has a larger traffic pool, finer population label granularity, and simpler operation procedures. Data shows that Douyin's huge engine occupies 70%-80% of the short drama distribution market. Abai, the head of short dramas at an MCN agency, told "Focus" that the market size of mini-program short dramas is estimated to be around 38 billion yuan by the end of this year, and ByteDance alone accounts for 20-25 billion yuan.

However, the users of Kuaishou, Douyin and Weixin have their own characteristics. For example, Douyin's audience prefers female-oriented content, mainly about sadomasochism, sweet love, flash marriage, and wealthy CEOs, and focuses on "romance"; Kuaishou's users prefer male-oriented content, mainly about war gods, rebirth, and time travel, and focuses on "cool dramas"; and the user portrait of Video Account is older and from lower-income regions, and is less sensitive to prices.

Li Yunming observed that the popular themes of mini-program short dramas shifted from male-oriented to female-oriented in the second half of this year , and the number of female-oriented hits increased significantly. Many original male-oriented production teams also began to turn to female-oriented. Since December, female-oriented dramas accounted for more than 70% of the daily short drama charts.

In addition, there are some unprofessional streaming companies in the market. If you hand over the material to them for editing, you may encounter piracy problems, which will aggravate the difficulty of increasing the volume of streaming and the chaos in the industry. Li Yunming told "Dingjiao" that his team handed over the "submission version" of a drama to a streaming company for editing. The folder contained the backup name of the drama. As a result, before the film was officially released, pirated copies were already flying everywhere, and "the pirated film title still used the backup name."

Nowadays, as the short drama industry is subject to stricter supervision, the advertising revenue of various platforms has also declined. According to statistics, the daily advertising expenditure of short dramas on ByteDance was 50-60 million, Kuaishou was 20 million, and Tencent Advertising was about 10 million. However, the overall market of various platforms has generally fallen recently, which means that the traffic business that earns money without doing anything is no longer so easy to make.

2. Internally: Is it possible for Douyin and Kuaishou to make independent apps?

Speaking of short dramas, as early as three years ago, long video and short video platforms tried to enter the market to make money, but why did short dramas only become really popular this year?

In fact, the shared-revenue short dramas of previous years and the mini-program short dramas that became popular this year are two different products.

Titan introduced that around 2020, Kuaishou has been focusing more on short dramas of online dramas. The producers use the "guaranteed minimum + profit sharing" model to produce short dramas and provide content for the platform. These short dramas usually have 20 episodes, and each episode is about 2-3 minutes long. There have been hits such as "The Princess Is Above".

In 2020, Kuaishou launched the "Star Plan", cooperating with creators in the short drama industry using a profit-sharing model. The platform generally sets up hundreds of thousands of cash as a guaranteed profit-sharing payment to provide guarantees for content creation.

What has become popular this year is mini-program short dramas, which are mainly broadcast on Douyin and Kuaishou, and divert traffic to the mini-programs for single episode or package payment. The number of episodes is generally 80-100, and each episode is 1-2 minutes long. The shooting cycle is shorter and the cost is lower.

Abai said that when Kuaishou started to produce high-quality short dramas with split revenue, its original intention was not to directly generate revenue from the short dramas, but to compete with Douyin for the length of time users stayed and the level of activity. "At that time, it was logical to directly produce free high-quality short dramas and incubate situational short drama experts, because once paying users are easily lost."

The same logic applies to Douyin. In early 2022, Douyin launched the boutique short drama "Twenty-Nine" produced by "Hao You Neng Ling", a subsidiary of Lemon Film and Television. Each episode is about 3 minutes long, with a total of 20 episodes, and the last 4 episodes require payment.

On short video platforms, users are more likely to watch short videos rather than follow them, and there is a large amount of free content on the platform. Under this logic, the income from Kuaishou and Douyin's own paid mini-program short dramas is not as stable as directly selling traffic. In contrast, Douyin and Kuaishou have both chosen the monetization plan of brand-customized short dramas - shooting continuous short dramas (usually around 10-30 episodes) by situational short video experts and implanting brand advertisements.

For example, the director of "The Princess Is Here" collaborated with the brand "Jingdong New Department Store" in his new film "Donglanxue". Douyin influencer "Shanshan" collaborated with the skincare brand Guyu to tell the story of her and the editor-in-chief of a magazine. "Users don't pay for content. In the end, this kind of short drama is still about selling goods." Li Yunming said.

In its financial report, Kuaishou mentioned the revenue from brand-customized short dramas many times. In the third quarter of 2023, the company's revenue from the Star Project short drama investment increased by more than 10 times month-on-month, and the number of short drama creators with e-commerce income increased by 35% throughout 2022. Many industry insiders predict that brand-customized short dramas will be the focus of brand promotion in the future, and brands may tilt their marketing budgets toward short dramas.

After the mini-program short dramas became popular, Douyin launched the Hongguo Short Drama APP (now renamed Fanqie Short Drama) in May this year, and Kuaishou launched the independent short drama APP Xifan in December (only available on Android).

"Dingjiao" found that Hongguo short dramas have relatively rich content, including short dramas, audiobooks, novels, comics, etc. The highest number of short dramas played exceeded 2 million, and there were some non-explosive dramas of "short drama stars". Most of the short dramas on the Xifan APP software are about 30 episodes of high-quality short dramas, most of which have passed their life cycle. Kuaishou purchased the copyright at a low price and provided it to the audience for free, and the highest number of plays was also around 2 million.

The left picture is Xifan APP, and the right picture is Hongguo Short Drama APP

Compared with the payment model of short dramas in mini programs, there are currently two main profit methods for the top short drama APPs on the market. One is the IAA model (pure advertising monetization) , in which users unlock short dramas by watching advertisements . Kuaishou Xifan APP belongs to this category. Douyin Hongguo has not yet placed advertisements. Industry insiders believe that this is because it is still in the stage of gathering traffic and will add advertisements later; the other is a hybrid model of IAA (pure advertising monetization) + IAP (monetization through user membership fees). In addition to watching advertisements, users can also purchase APP memberships to unlock all short dramas on the site. The Hippo Theater APP under China Radio and Television belongs to this model.

Compared with the paid model, Titan is more optimistic about the free model. In her opinion, it usually costs more than 100 yuan or even more to watch a short drama now. Once users know that there are free channels to watch short dramas, they are likely to download them. "Hongguo is using the logic of free novels of Tomato to make short dramas. The scale is expanding rapidly, and now there are about 5-8 million daily active users. The free user pool is much larger than the paid user pool."

Abai believes that making independent short drama apps is a major trend in the future , because most of the traffic for short dramas now goes to mini programs, but mini programs also have disadvantages. The probability of users opening them again is very low, and the current homogeneity of short dramas in mini programs has led to a gradual increase in customer acquisition costs. "When the business develops to this stage, it is necessary to make an APP to attract users and slowly make multiple contacts and conversions." Abai said.

However, the performance of user downloads, opening rates, and retention rates of short drama apps is still questionable. For the platform, the greatest value of independent apps is that short dramas are one of the few industries that have grown exponentially in the past two years. Even if the short drama business does not make money, short dramas will still be a track that the platform attaches importance to.

3. What’s the next step for the platform’s short story arcs?

Short dramas have become a "star business". Kuaishou, Douyin, and Video Number have entered the short drama industry and are not just satisfied with earning advertising fees. They are more concerned about the overall content and expert ecology, user time, and customer acquisition growth.

Cheng Yixiao, Chairman and CEO of Kuaishou, said in the 2023 third quarter earnings call that this year, the advertising consumption of the paid short drama industry on Kuaishou has increased month by month, and the consumption of paid short dramas in the third quarter increased by more than 300% year-on-year and nearly 50% month-on-month. In addition, Kuaishou mentioned in its financial report that the cost of acquiring users per user in Q3 this year continued to decline month-on-month, and user retention increased. Although Douyin has not disclosed data, according to industry insiders, the overall trend should be consistent with Kuaishou.

However, as regulations tighten, the short drama industry faces a cooling down.

Since the special governance in late November, Douyin, Kuaishou and WeChat platforms have banned illegal short drama content and accounts on the one hand, and raised the threshold for traffic on the other.

On the evening of November 20, Douyin Juliang Advertising released an announcement stating that short dramas on Douyin mini-programs and short dramas that jump to other third-party platforms can only be invested after being reviewed and played. In addition, Douyin also prohibits distribution and agency investment. Kuaishou announced that it will stop the commercial investment of third-party micro-short drama mini-programs on the evening of December 31, and focus on developing the Kuaishou mini-program and Kuaishou's internal links.

The above measures are seen by the outside world as the platforms tightening their control over the risks of short drama content, while strengthening the short drama payment ecosystem on the terminal, keeping the traffic on the site and circulating it on the site. "The platform needs to develop in a controllable direction, sacrificing the growth rate, but also becoming more formal. From disorder to order, this is the inevitable path for the industry." Abai said.

However, by cutting off external links and requiring payment within the terminal, users will watch short dramas directly on the terminal when they come across them. The existing business model will be reshaped and the platform's advertising revenue will temporarily decline.

Another trend in the industry is that many producers have begun to transform into theaters that bring together multiple mini-program dramas. These mini-program theaters are distributed in the Douyin, Kuaishou and WeChat ecosystems, and the number has reached thousands. "Production companies all began to transform after the production process suffered losses, turning to mini-program theaters with lower costs, but when producers all thought so, the production of dramas became less and less sufficient, and the market began to grow blindly." said a practitioner.

The review of mini-program short dramas is becoming more and more strict, and the short drama industry will move towards the high-quality route. One signal is that a large number of people from the film and television industry have begun to enter the market, from the earliest Huace, Lemon Studios, and Perfect World to the recent director Wang Jing and actor Gao Yalin joining the short drama.

At present, judging from the "short, frequent and fast" business model of mini-program short dramas, the route of high-quality production is somewhat difficult. Some industry insiders have noticed that once the industry began to shout the slogan of high-quality production, it was basically difficult to see battle reports, and the number of hit dramas was also decreasing.

But from the perspective of the long-term development of the industry, short dramas must inevitably move towards high-quality products. Abai said that if the industry wants to take ROI to a higher level, it also needs newer and better content to enhance the industry's paid value.

Li Yunming also reminded that true refinement is refinement at the level of story content, not refinement at the level of cost. Stories that are popular with the audience are the foundation of refinement.

Before the arrival of true high-quality products, the practitioners of mini-program short dramas should take a steady pace, lay a solid foundation, and wait and see. The industry generally believes that mini-program short dramas will usher in a reshuffle in the second half of next year, and by then, the direction of the entire industry will change.

A practitioner said that some of his colleagues who had transformed from assistant directors, on-site producers, and actors to become producers or directors of mini-program short dramas have returned to their old jobs, "because they don't understand the logic behind the hits of mini-program short dramas, so it's difficult to make money", and some producers also stopped losses in time and exited the industry, "shooting 5, 3 failed, and they dare not go ahead with the remaining 2".

This also means that the industry's rapid growth bonus period is about to end. Douyin, Kuaishou, and WeChat will rise and fall together with the industry ecosystem. Before the industry changes come, they have begun to lay out the internal circulation of their own ecosystems. What the platforms may need to think about is, when the industry begins to reshuffle, how should the platform's short drama stories be told?

Author: Su Qi

WeChat public account: Dingjiao (ID: dingjiaoone)