The low threshold of the short drama industry is slowly disappearing

This article analyzes the current market data of short dramas. It can be seen that there are complex interests behind the popular short dramas. The low threshold of the short drama industry may be slowly disappearing. It is recommended for friends who are interested in the short drama industry. Let us learn about the stories behind the short drama industry.

The domineering boss, the son-in-law and the god of war, which were collectively complained about in previous years, have suddenly become the hottest codes for wealth this year.

According to ByteDance's monitoring, the annual recharge flow of paid short dramas, mainly mini-program short dramas, reached more than 18 billion yuan. Soochow Securities predicts that the scale of the entire short drama market may exceed 30 billion yuan in 2023, equivalent to 36% of the domestic movie box office this year.

According to data from iMedia Consulting, the market size of micro-short dramas will reach 100 billion yuan by 2027, with an annual compound growth rate of 28.1%.

A business that constantly explores and satisfies human nature has become the only way to make a profit in all the short plays centered on "fun".

Even people's tolerance has increased unprecedentedly. In the past, they were very picky about the lines and costumes in long dramas, but in short dramas, there was no problem if a loser guy became the world's richest man with a savings of 20,000 yuan.

The simple and crude reversals and bizarre plots not only cure the mental exhaustion, but also become an excellent reason for traditional film and television companies to lower their status and make money.

So much so that when a hit product with a turnover of tens of millions or even hundreds of millions becomes a myth, the joke about a horizontal store becoming a vertical store is no longer a joke, but a weather vane of capital transfer.

1. Why break the circle this year?

Before the popularity of mini-program short dramas, the last similar business that could make money from the audience's pockets was the shared-revenue dramas born on video websites.

In 2016, iQiyi launched its first profit-sharing drama "The Demons Strike Back in Chang'an", with an investment of only 4.5 million yuan, but the profit from profit sharing was as high as 20 million yuan, with a return on investment of over 400%, which instantly killed all the theater movies.

As a result, this low-cost, high-return business was quickly developed by video websites.

The emergence of shared-revenue dramas is essentially the result of small and medium-sized production companies finding a supply outlet with the help of video websites. Since they do not have an advantage in big IPs and large productions, it is better for them to control production costs within a reasonable range and gain more substantial profits with relatively low costs.

For example, most shared-revenue dramas are 12 episodes long. This is because under the shared-revenue model, pricing is based on episodes, and such a short volume can control costs to the greatest extent possible.

However, the revenue-sharing drama still has the typical characteristics of a long drama: long production cycle, high investment (relative to short dramas), and the content direction is determined by the producer and the screenwriter team. Yang Dongliang, the director of "The Demons in Chang'an", once said that the reason for taking the role was "to prove his ability to control the narrative of a feature film."

Under this logic, the revenue-sharing drama is doomed to be a long drama:

The winning codes for blockbuster products are becoming more and more demanding, including high cost, high quality, star effect, and exciting stories.

This is not like movie box office, which increases year by year with the increase of screens. Whether a shared-revenue drama can make a profit depends on how many people are willing to pay for the video website, and further, the decisive factor is whether the number of members can continue to grow.

The bad news is that after reaching 100 million members, the number of members of the major video websites has basically been crawling. This has led to problems in the entire revenue-sharing drama industry, with fewer and fewer hits.

Mai Tian, ​​founder, CEO and director of Mai Tian Pictures, shared in the early years that the profitability of shared-revenue dramas is not the 80/20 rule, but the 19/10 rule, that is, only 10 out of 100 works can reach the profit level.

It's even worse than this. The "Micro-Short Drama Development Observation Report 2020-2022" mentioned that among the nearly 1,000 short dramas released in three years, only 17 of them had a book value of more than 5 million.

Therefore, today's shared-revenue dramas have begun to move closer to short dramas in some aspects.

For example, each episode of this year's hit drama "Provoke" is about 18 minutes long, but the shooting period was condensed to 23 days.

Last year, practitioners conducted a survey and found that from 2020 to 2022, the proportion of short dramas with a single episode of 7-10 minutes increased from 10% to 23%, and the proportion of works with a total duration of 2-5 hours increased from 17% to 34%.

The reason why there are fewer and fewer hits is not difficult to find. This PGC+to B drama model relies too much on long video platforms for broadcasting channels, and most of them are broadcast exclusively. This means that not only is the scope of distribution limited, but the income comes from platform sharing, competing with traditional long dramas and online movies for content procurement budgets.

In addition, compared with long series, short series do not have advantages in terms of directors, actors and marketing resources. There are few short series with a small revenue share, and each episode is short. Most of them are customized for a single brand, so the advertising scale is also relatively limited.

By this year, the situation of shared-revenue short dramas is even less optimistic.

From January to November 2023, the TOP 10 shared-revenue short dramas had a combined market share of 12.4% in terms of viewing volume, and a combined shared-revenue box office of approximately RMB 90 million. Based on this estimate, the overall market size this year is only around RMB 800 million, which is a stark difference from the RMB 30 billion scale of mini-program short dramas.

The reason why mini-program short dramas have jumped from being collectively complained about to becoming the secret to wealth is that behind their low-intelligence, brainless and rough content, there are several factors that shared-revenue dramas do not have.

On the one hand, in the fragmented era, people's demand for content is more diversified. The old-fashioned grand narrative is slow and old-fashioned, and it is difficult to stimulate people's desire to pay. Instead, niche themes, conflict reversals, and even more straightforward and popular lines can make people open their wallets without thinking.

One example is "Joy of Life" and "The Rebel Princess" from previous years. Although they are long dramas, their core is basically the same as today's God of War and Domineering CEO short dramas. The core of the cool novel only needs to give the audience unthinking pleasure.

On the other hand, the removal of walls between platforms has opened up the “last mile” for user payment.

The short video ecosystem has a more accurate user portrait. After introducing the efficient payment capabilities of WeChat mini-programs, short dramas have truly realized the path conversion of buying volume-push-user click-user payment-data feedback.

This also explains why the current distribution channels for short dramas mainly occur on Douyin (Douyin short drama daily consumption exceeds 50 million yuan, Tencent peaks at 8 million yuan, Baidu and Kuaishou peak at around 3 million yuan), while the number is more distributed in WeChat mini-programs (WeChat mini-programs account for 53%, Douyin mini-programs account for 43%, and the remaining 4% are distributed in APPs and quick applications).

On this basis, mini-program short dramas can use the C2M model to achieve production based on sales, and downstream investment data can be fed back to the upstream production link in real time.

It usually takes only 2 weeks for a drama to go from project establishment to launch, with a shooting period of 3-7 days. After the launch, the investment return is relatively fast, with an average ROI of 1.1-1.2 in 3 days (0.8-0.9 on the first day, an additional 0.15 on the second day, and an additional 0.05 on the third day). If it is lower than this level, stop loss in time and stop chasing investment.

This is the winning formula of mini-program short dramas: short payback period, light carrier, low threshold, and multiple links. Production and distribution are all based on Internet algorithm logic, achieving true to C. This is also the most fundamental difference between it and the long drama business model, so that the dream scene circulating in the industry is "shooting in 1 week, breaking 100 million in 8 days, and getting rich in 10 days."

2. Conflict of Interests

In California, USA, during the 18th and 19th centuries, a group of gold prospectors sold their property, packed their bags and created the largest gold rush in American history.

At its peak, the value of gold production in California grew rapidly from $5 million to $65 million, and the United States' gold production accounted for almost 45% of the world's total at the time.

In this land full of opportunities and challenges, stories of "getting rich overnight" and "family breakdown" are always repeated: the lucky ones dig up gold and become the darlings of the new wave; the unfortunate ones never see those legendary "gold nuggets" that are glittering and dazzling throughout their lives.

The gold rush for skits also attracted a group of similar "gold diggers".

Li Bo is one of them, working part-time as a producer in a mini-program short drama team. His team has finalized an intention to cooperate with a platform on a short drama, in which the platform provides the script and related expenses, and the team bears a series of production-related expenses, in return for 6% of the recharge amount.

There are countless short drama practitioners like Li Bo. Qichacha data shows that as of now, there are 19,800 new short drama-related companies in my country this year, of which 18,900 were added in the first 10 months.

However, the first thing that gold diggers encountered in the New World might not be gold, but the interest distribution order that was still being established in the new market.

Taking the content production link where Li Bo works as an example, there are as many as four cooperation models between the platform and the contractor, and each model is a struggle for interests among the participants in the chain.

The first is the platform advance payment model, where the platform bears all production costs and pays about 2% of the contractor's recharge turnover;

The second is a cooperative model, where the platform provides the script and the producer each bears half of the production cost, and the platform distributes 40%-60% of the profit to the producer;

The third is the platform distribution model, where the distributor only provides the script but not the production funds; the contractor bears all the production costs and later shares the profits according to the turnover, with a profit ratio of 6%-8%;

The fourth is the contractor's advance payment model: the contractor bears the script and production costs and obtains the copyright of the script, which is divided into exclusive and non-exclusive situations. The price of exclusive copyright is higher.

Among the four methods, the capital investment and risk of the platform party decreases successively, while that of the contractor gradually increases, especially for small and medium-sized contractors, the risks are higher.

Li Bo's team ultimately failed to reach a cooperation agreement with the platform because they were unable to confirm the platform's actual post-investment recharge data, and the lack of transparency in information could result in losses in their own profits.

Li Bo did some calculations and found that even if the deposit amount reached 10 million, they could only get 6%, or 600,000, which was just enough to cover the cost. The platform's lack of transparency increased the risk of capital preservation.

In such an industry where revenue sharing is not transparent, the recharge data is in the hands of the platform, and the production team can only be controlled by the platform. The business logic of the short drama platform is to use the profits from the 10% of hits to cover the losses caused by the remaining 90% of dramas.

But even so, a single platform can still maintain more than 60 works online every month, because there are so many producers like Li Bo.

3. Who is getting rich overnight?

During the gold rush in California, in addition to a small number of lucky people who made their fortunes from gold, there were also some people who actually seized the opportunity.

They did not choose to join the "gold rush", but instead chose to sell the machinery needed for gold mining or to engage in the catering industry and sell other daily necessities. Due to the influx of a large number of people into California, the market order suffered a devastating impact, and what was sold at sky-high prices was no longer gold, but various survival supplies and mining machinery.

Similar opportunists have also appeared in the short drama industry chain.

Liu Chun is one of the short drama distributors. Usually, Liu Chun can get the source file of the free part of a short drama, edit it into a short video and release it. When the audience watches through the link and pays, Liu Chun can get a share, "about 50%-60%, and the maximum daily income can be 400 yuan."

In addition to distribution, there are also many training businesses in the short drama industry. Generally, they are divided into two categories: one is teaching how to shoot short dramas, how to set up pay points, content creation, and hooks; the other is distribution training. Liu Chun's distribution business also paid 400 yuan in tuition.

But neither Li Bo nor Liu Chun are the main participants and beneficiaries in the short drama industry chain.

According to the composition of the industrial chain, the upstream, midstream and downstream of short dramas are IP & screenwriters, producers, media and carrier platforms.

The most upstream IP & screenwriters are responsible for producing scripts, and their income is a guaranteed minimum + profit sharing. In 2023, the profit sharing of script parties is generally 10,000-50,000 yuan guaranteed minimum + 1-2% turnover profit sharing.

The midstream contractors are responsible for shooting and producing short dramas, with income generally being a guaranteed 50,000 to 100,000 yuan + 3-5% commission on turnover. The top contractors have a higher rate of hits, and their commission income accounts for a higher proportion.

The income of downstream media and carrier platforms mainly comes from the traffic income from copyright holders and distributors, in addition to a small part of channel income (for example, the WeChat channel cost rate is 10%, of which 5% is returned in the form of advertising fees, and the net rate is 5%; Douyin is 0.6%, and Kuaishou is 4%).

For copyright holders, the expenditure mainly includes the purchase/production + sharing costs and delivery costs of the drama. In addition to user recharges, 10-15% of the revenue from cooperative distribution will also be returned to the copyright holder. Although distributors do not need to bear the upstream script and production costs, they must bear the streaming costs, and then deduct 10-15% of the revenue as a share for the copyright holder.

The average ROI of short dramas is 1.1~1.2, and the cost of buying traffic accounts for 80%-90% of the user's recharge flow. The remaining 10%-20% is distributed among copyright holders, contractors, distributors and other links.

But the ultimate beneficiaries are not the workers in the industrial chain. The biggest hidden pain of this industry is that the cost of traffic investment is too high, and all the money is earned by the traffic platforms.

According to Southern Weekend, 90% of the short drama industry's revenue is used to pay advertising fees on various platforms, and the industry's profit margin will not exceed 10%.

4. Who is creating the hit products?

Among the short drama concept stocks in the past year, online literature companies are probably the biggest beneficiaries, with the share price of China Online having increased sixfold.

The role that China Online plays in the short drama industry chain is essentially that of a copyright holder.

Data from ByteDance shows that the number of copyright holders increased from 41 to 150 from Q4 of 2022 to Q3 of this year, of which 48% were online literature companies, while social, gaming, e-commerce, and film and television companies also underwent transformation.

The transformation in film and television is particularly eye-catching.

Lemon Studios, which has produced hit dramas such as "Little Joy" and "Nothing But Thirty", has launched "Twenty-Nine"; Huace Film & TV, which participated in the production of "The Assassin", has launched "The Identity of the Down-and-Out Husband as CEO Exposed"; and Wang Jing, who is ridiculed as the king of bad movies, is also preparing a new short drama "The Billionaire Silly Prince".

Although professional institutions have entered the market, it may not necessarily lead to a dimensionality reduction attack.

Chen Duanqing of Dianzhong Technology once said: "There is a saying in the micro-short drama industry that traditional film and television people need to learn for one year before entering the industry, online writers need to learn for half a year, and MCN organizations only need to learn for three months."

This sentence reveals the particularity of mini-program short dramas: new entrants need at least three months of trial and error.

The production and launch cycle of a relatively high-quality mini-program short drama is approximately 3 months, so for companies that have just entered the market, they need to spend 3 months going through the production and buying process, and then spend another 3 months to replicate it to verify the effect.

Although film and television companies have large amounts of capital and professional production teams, they entered the market relatively late. Faced with rising traffic costs and increasingly sophisticated audience tastes, they need to pay a high learning cost.

The so-called ability to create hits, traditional long dramas may depend on the screenwriter, director, and actors, while mini-program short dramas have a completely different logic.

The popularity of a short drama depends largely on the strategic combination of content, materials, channels and target audiences, and is highly correlated with the delivery capabilities.

To what extent is it related? In a relatively mature mini-program short drama company, the proportion of volume-buying pitchers is often more than half. The higher the revenue of a company in the industry, the more pitchers it has.

For example, advertising investment and traffic companies such as Jiuzhou, Capacity, and Jiangxin have built their own investment and traffic teams of hundreds of people, covering the entire process of platform construction and investment and traffic; Jiashu Technology cooperates with hundreds of dealers, each dealer has 10 pitchers, so that one drama can be deployed with thousands of people for investment.

The leading companies need to release at least one new drama every day, with a box office of 3-5 million yuan and a monthly income of about 100 million yuan. In order to achieve high delivery efficiency, they often have to invest in thousands of strategy models on the first day, with each model costing 1,000 yuan. Usually 90% of the models will be eliminated on the first day, while the profitable models will be retained and increased.

This has shaped the leading manufacturers’ ability to create hit products.

From January to July 2023, the share of hot-selling products of Dianzhong and Jiuzhou was more than 15%, while that of Peanut Bookstore, Yingke, Chuangliang and Bingtian was all between 5% and 10%. The TOP10 companies accounted for 81%.

Even so, film and television companies are still lining up to participate. The core behind this is another set of gameplay: most film and television companies use IP derivative projects as the entry point and reduce costs by shooting long and short projects in batches.

Wood, assistant to the president of Changxin Media, said: "The ultimate goal of film and television companies entering the short drama market is IP development." Yin Xiangjin, general manager of Wanda Films, also said that the direction of Wanda Film's short drama business is "shooting long and short dramas together, and short dramas serving long dramas."

5. Another cultural export

No one would have thought that the domineering boss, the god of war and the son-in-law would one day become a form of cultural export.

Sensor Tower data shows that in January 2023, the net turnover of the top five overseas short drama apps was only US$80,000, but by November it had grown to US$11.01 million.

Although it has increased 136 times, overseas short drama practitioners still have to tell you seriously that this is just the beginning. After all, there is still a lot of room for improvement compared to domestic levels.

The confidence comes from the huge opportunities in the overseas market: there are almost no direct competitors, a huge potential user group, better payment habits, and lower traffic costs. Unlike domestic short dramas that use mini-programs as the main carrier, overseas short dramas are mainly in the form of APPs, which are more conducive to cultivating private domain traffic and long-term users.

Faced with this unprecedented wealth that was almost within reach, the pioneers directly launched a wave of mobile output, adding translated subtitles to the original domestic short dramas and putting them online, with low cost and high speed.

But after a while, they found that foreigners were not interested in rough imported products, and "The Crooked Son-in-Law" was not as profitable as werewolves and vampires, so ReelShort, FlexTV and others began to make major changes, using more costly localized methods, and the method of local actors + local scenes finally became popular.

However, due to the small number of actors, strict union system, and imperfect shooting and production system, the shooting period of overseas short dramas is generally longer and the cost is higher.

For example, ReelShort only releases 3-5 new films per month, with a production cycle of 45-60 days and a cost of $150,000-200,000 per film. This is because overseas countries have not yet formed a streamlined filming system similar to Hengdian, Internet celebrities, and MCNs, and the daily working hours of actors are strictly limited by the union, so the overall cost is higher than in China.

On the other hand, manufacturers need to have a good understanding of the needs of local users. Domestic novel content cannot be directly transplanted overseas, but needs to be adapted into a form that local users like. Relevant screenwriter talent is relatively scarce.

While production capacity is limited, traffic efficiency is also limited due to differences in overseas business environments and infrastructure. Overseas users need to have independent apps, lack a mini-program ecosystem, and have a blocked traffic path.

6. Ending

The California Gold Rush gradually cooled down after 1854. Due to the intervention of many large capital groups, retail investors were directly kicked out. The final outcome was that there were fewer and fewer "gold diggers" and more and more large-scale mines.

Although new gold mines were discovered in Colorado and there was a second "gold rush", the "gold diggers" who abandoned their homes and careers were never seen again.

The reason is that the development and progress of technology has given major capital groups more room for profit improvement in gold mining. Entrepreneurs have gradually controlled the entire mining area and formed a monopoly trend.

A similar story is also playing out in the short drama industry.

In 2022, the starting cost of producing a short drama was 100,000 to 200,000 yuan, and the high-end version could reach 800,000 yuan; this year, the starting cost has risen to 300,000 yuan, and the high-end version can reach as high as 1.5 million yuan.

In the wild development stage of short dramas, rapid launch and low cost are the key to quickly verify the business model. But once the business model is verified, high-quality production becomes an inevitable trend, which means that small workshop-style production will gradually be eliminated.

The "dopamine dressing" that suddenly became popular this summer has brought about a special term in the field of psychology.

According to experts, dopamine is a neurotransmitter secreted by the brain that is responsible for transmitting messages of excitement and happiness. It is also known as the "code of happiness."

Therefore, when people find that stress cannot be dissipated by itself, it is not that they cannot afford the more expensive ways of decompression, but that the domineering boss, the god of war, and the son-in-law who only cost a few dozen dollars are more cost-effective.

Just as the audiences asked the soul-searching question when Feng Xiaogang's "1942" lost to "Lost in Thailand" that year, why should I go to the cinema to watch a disaster film during the family-friendly Spring Festival?

Sometimes, dopamine can determine a lot of things.

*The interviewees in this article are all pseudonyms

Author: Decoding Studio

WeChat public account: Decode (ID: kankeji001)