(Yicai) June 1 -- This year will be a banner year for artificial intelligence-generated short dramas featuring lifelike human characters, but companies entering the industry blindly without any proper experience face a 99 percent risk of losses or even bankruptcy, industry insiders said.

About 128,000 micro-dramas were released in the first quarter, over 95 percent of which were AI-generated, according to data recently released by the China Netcasting Services Association.

The AI short drama market reached CNY24 billion (USD3.5 billion) with more than 280 million users last week, the association said. As the sector experiences explosive growth, capital is rushing in, with AI video model companies, content platforms, corporate investors and state-owned enterprises all entering the market.

The investment threshold for a single AI short drama is very low, often only tens of thousands of yuan, which is equivalent to thousands of US dollars, Yang Yang, head of the Short Drama Study Room platform, told Yicai. In terms of return on investment, a short drama can be produced within three to five days, its peak viewing cycle usually lasts one to two weeks, and its overall revenue performance can be assessed within two months.

Although the opportunities created by the AI short-drama boom are evident, the industry is currently facing a situation where revenue is increasing but profits are not.

For example, digital content firm COL Group’s revenue surged 43 percent last year from the previous year, but its net profit plunged 176 percent, according to the firm’s 2025 financial report. Revenue from its short dramas and intellectual property-related products surpassed online literature for the first time to become the company’s largest source of income. However, this also caused sales expenses to double from the previous year, mainly due to overseas short drama marketing and user acquisition costs.

iReader Technology also moved from profit to loss in 2025. Short dramas and their derivatives became its largest business segment, but the rapid expansion of the Beijing-based firm’s domestic and overseas short dramas businesses significantly hiked spending on marketing and production capacity. The company's AI-generated content and overseas platform iDrama are still in a heavy investment phase, causing profits to lag behind revenue growth.

Overcrowded Market

In terms of output, AI short dramas have already surpassed dramas using live actors, but their failure rate is equally striking. Of the 44,200 new AI dramas added to TikTok's Chinese version Douyin in April, only 267, or 0.6 percent, garnered more than 100 million views, according to data from research institute DataEye.

As of Feb. 28, there were 127,800 AI dramas and animated shows being streamed, according to the China AI-Generated Film and Television Development Report (2025-2026). Fewer than 150 of them, or 0.1 percent, had exceeded 100 million views.

Although plagiarism does occur in short dramas with real actors, it usually takes at least half a month to produce a copy-cat drama, said Feng Jun, a short drama producer. By contrast, as long as sufficient computing power is available, an AI short drama can be replicated in one or two days. This creates major uncertainty regarding both the lifespan and profitability of hit AI-generated productions.

Even so, large numbers of newcomers continue to enter the market. Feng believes that the inevitable result will be an increasingly overcrowded and highly competitive market, with many companies eventually suffering losses or even going bankrupt.

Editor: Kim Taylor