Everyone Thought AI Short-Form Videos Were a Goldmine, But 98.7% Are Failing to Break Even

User Numbers Soar but Profitability Remains Extremely Low
Chinese Government Steps Up Regulatory Efforts
Stricter Regulations from September... Focus Shifts from Quantity to Quality
Industry Redirects Funds Back to Live-Action Dramas

Although a surge of AI-generated short-form videos is pouring out across China, only 1.3% of them have managed to break even.

According to Jianshi Daily on September 1, around 221,900 new AI short-form videos were released on Douyin, China's version of Instagram, during the first half of the year, surpassing a total of 51.5738 billion cumulative views. The annual market size for this sector is expected to exceed 40 billion yuan (approximately 8.1652 trillion won).

A scene from a controversial AI artwork with similar expressions. Baidu, China.

Profitability Remains Extremely Low... 98.7% of New Works in the Red

A scene from an AI short-form video. Baidu, China.

The number of short-form video users has skyrocketed from 120 million last year to about 600 million recently. However, profitability has been found to be extremely low. Out of 77 new works, only one (1.3%) surpassed the break-even point, while the remaining 98.7% were confirmed to be running at a loss.

When utilizing AI, production costs can be reduced to about 800–1,200 yuan per minute (approximately 163,000–245,000 won), which is only one-fifth of the total cost required for a live-action drama. Lower prices and simpler production methods have led to explosive growth in production volume, but viewership rates for individual works appear to be diluted.

Lin Qiwen, Vice President of market research firm DataEye, pointed out, "Many creators believe that by adopting AI, they can complete works quickly and generate high profits, but in reality, it only accelerates their financial losses."

Stricter Regulations Starting September... Addressing Loopholes

A scene from an AI historical drama. Baidu, China.

In response to the situation, the Chinese government has stepped up its regulatory efforts. Beginning today, under the newly implemented "Short-Form Development Management Measures," the industry is required to shift its focus from purely quantitative expansion to qualitative oversight.

According to the regulations, the level of oversight for AI short-form videos depends on the scale of investment. ▲ Projects with an investment amount exceeding 800,000 yuan (approximately 163.2 million won) or those using specialized materials must obtain direct approval from the National Radio and Television Administration. ▲ General projects with investments between 300,000 and 800,000 yuan (approximately 61.2 million to 163.2 million won) require review by the radio and television department of each provincial-level jurisdiction. ▲ For projects with investments below 300,000 yuan (approximately 61.2 million won), the airing platform itself is fully responsible for self-review and assigning broadcast numbers, among other management duties.

Additionally, all AI-created works are now required to display a notice indicating "AI-generated content" on every screen. This measure is aimed at curbing the rampant distribution of similar faces, facial expressions, or formulaic storylines, while also guaranteeing viewers' right to make informed choices.

Industry Redirects Funds to Live-Action Dramas

Animation created with AI. Baidu, China.

As fatigue with low-quality AI content grows, major video platforms are starting to take action. The short-form platform "Hongguo" has deleted tens of thousands of low-quality AI dramas. Douyin has also introduced a pre-screening tool in its "Short-Form Creator Center" as of last month. As a result, the risks of portrait rights and copyright infringement before a work is aired have been reduced.

Meanwhile, the live-action drama market, whose position had narrowed due to the flood of AI short-form content, is beginning to warm up again. The number of new live-action dramas entering Hongguo's monthly chart plummeted 65% from 432 in February to 110 in June. However, with the government and platforms rolling out large-scale support measures, sentiment is shifting.

The National Radio and Television Administration has decided to collaborate with six major video platforms to invest over 6 billion yuan in the production of high-quality short forms. Douyin Group has also established a dedicated fund worth 500 million yuan to foster short-form videos based on real-life topics. According to the local industry, this is part of a strategy by major platforms to secure a supply chain for high-quality live-action content in advance, in preparation for a post-AI bubble era.

This content was produced with the assistance of AI translation services.