(Yicai) Aug. 3 -- Artificial intelligence-generated content has rapidly replaced live-action works in China's short-drama market this year, leading to a string of headwinds, including content homogenization, an extremely low hit rate, and tightening revenue-sharing terms for creators.

Over 95 percent of the 128,000 new mini dramas released in China in the first quarter of this year were AI-generated, meaning that thousands of new such works hit Chinese platforms every day, according to data from the China Network Audio-Video Association.

In addition, only 1,629 live-action mini dramas were released in June, down from 1,934 at the start of this year, with fewer new projects kicking off. The number of live-action series on the Redguo Short Drama's Top 10 Hot Chart dropped to just four on July 20 from all 10 on March 19.

The cost and time to produce AI-animated dramas is two-thirds less compared with live-action works, Chen Qi, a film and television producer and member of the Chinese Writers Association, told Yicai. A high-quality live-action mini drama costs between CNY200,000 and CNY1 million (USD 29,460 and USD147,300) to make, while an AI animation may cost from merely CNY100,000 to CNY500,000, explaining why producers bet on AI content, Chen stressed.

However, intensified competition and rampant content homogenization have lowered the odds of making a hit. Popular short dramas are spawning multiple AI-generated copycats featuring largely identical plots across multiple platforms, with only protagonist names and side plots altered.

Given the ceiling on users' daily viewing time across platforms, exposure for individual productions keeps getting diluted, so most series sink to the bottom of content traffic pools immediately after release.

Of the more than 221,900 new AI short dramas that premiered online in the first half of this year, only 1,055 accumulated more than 100 million views, according to a report by DataEye. In addition, just 12,000 works surpassed 10 million views.

Based on tracking data from third-party researchers, including Yunhe Data and Gudu Data, AI animations saw even lower hit rates. Only 62 of the around 50,000 newly launched such series in March recorded more than 100 million views.

The flood of new releases has also pushed up production costs for AI short dramas over the past six months, rising to CNY3,000 or even CNY5,000 (USD441.90 or USD736.50) from CNY1,000 for each produced minute, Chen noted, adding that higher visual quality requirements drive expenses further.

Producers of AI short dramas are also encountering tougher revenue-sharing terms across streaming platforms. Many platforms have cut guaranteed minimum earnings and slashed income-sharing rates.

Standard short drama creators used to earn CNY800 to CNY1,000 (USD117.84 to USD147.30) for 10,000 views, but the same number of views may now only bring them CNY100, with just big studios and premium series being able to secure favorable sharing terms.

Whether an AI short drama turns profitable can be determined within six months after launching, a long-time industry practitioner said to Yicai. Overall, profitability has become harder to achieve, and only works with strong viewership can generate sustained income through sequels, the person added.

"The growth momentum for AI short dramas will not slow down, with the format to expand its influence across other sectors," Lv Shaolong, deputy manager of Judian Short Drama and Lingju Animation, told Yicai. AI content is finding applications in games, educational videos, and e-commerce marketing clips, Lv said, adding that despite these vertical tracks remaining nascent, fresh commercial opportunities keep emerging.

Editors: Tang Shihua, Martin Kadiev