In Depth: Micro Drama Platforms Knock Down Paywalls as Viewers Lose Interest

Chinese viewers are increasingly cutting back on spending for micro dramas, a fast-growing entertainment phenomenon in China, largely due to repetitive plotlines causing waning interest in paid content[para. 1]. In response, platforms are adopting a dual approach: producing better quality content and offering it for free, with ByteDance’s Hongguo Short Drama leading the way[para. 2]. Micro dramas, which surged in popularity in 2022, are defined by their ultra-short episodes (often under 60 seconds) and intense, soap opera-like scenarios, designed for fragmented viewing habits and emotional engagement in a challenging economic environment[para. 3][para. 4].

ByteDance’s Hongguo, a newcomer launched in 2023, quickly overtook Alibaba’s veteran platform Youku by monthly active users, hitting 212 million in June 2024—a 179% annual increase—marking the first time a micro drama app surpassed a long-form video platform in terms of users[para. 5]. The overall Chinese micro drama market reached 50.5 billion yuan ($7 billion) in 2024, overtaking China’s movie box office revenue, with a forecasted climb to 63.4 billion yuan this year, reflecting a 26% expansion[para. 6]. The market’s early growth relied heavily on pay-per-view models, but as content became formulaic and less compelling, consumer spending dropped and marketing costs soared[para. 7]. Regulatory intervention further pressured the sector, with crackdowns on extreme and sensational content[para. 7]. Platforms are now shifting towards free viewing supported by advertising and investing in higher-quality productions, a model expected to comprise 80% of the market in 2025[para. 8][para. 11].

Hongguo’s strategy involves unlocking episodes through ad views and offering coin rewards to viewers, emulating the success of Fanqie Novel, ByteDance’s online literature platform[para. 12]. This approach led Hongguo to produce over 10 dramas surpassing 1 billion views each in under a year, with significant payouts to content partners exceeding 2 billion yuan since June 2024[para. 14]. In 2024, ByteDance merged its Douyin and Hongguo micro drama teams to streamline content creation, modeling its structure after established platforms by grading projects according to creative quality, particularly favoring adaptations from popular online novels[para. 15][para. 16].

As domestic competition intensifies, major Chinese micro drama platforms are expanding globally, with the US now accounting for nearly half of global micro drama revenue[para. 20]. Firms like COL Group have launched multiple overseas platforms, with ReelShort leading global short drama in-app purchases in Q1 2025[para. 22]. However, more than 90% of the 300+ micro drama apps competing internationally are predicted to fail due to rising costs and fierce rivalry, with most spending up to 80% of revenue on marketing[para. 24][para. 26]. Production costs, especially abroad, have surged, and many platforms fly foreign actors to China to lower expenses, yet costs remain high and quality often suffers due to rushed or unoriginal content[para. 31][para. 33].

To address cost and efficiency concerns, some platforms are deploying AI for translation, dubbing, and promotional content generation, reducing traditional time and expenses, though creative AI video generation remains unreliable for full-scale production[para. 36][para. 40][para. 41]. IReader, an online literature platform, used AI in its recent micro drama productions, cutting animation expenses and exploring further commercialization possibilities[para. 42]. IReader’s CEO projects robust growth ahead, as micro dramas now reach 500–600 million monthly users, far outpacing online literature and expanding the reach of web novel IP into broader media adaptation[para. 46][para. 47].