AI Content Abundance Creates New Industry Challenge In China: Falling Costs, Rising Competition And Shrinking Margins

China’s AI-generated short drama industry has expanded at a startling pace this year, but new data suggests the sector is now colliding with the limits of an “abundance” model built on cheap content alone. 

According to a report from research firm DataEye, roughly 1,300 new AI-produced short dramas are now uploaded daily across Chinese platforms — a pace that, extrapolated from first-quarter data, would total over 120,000 titles released industry-wide in just three months, with AI-driven productions accounting for more than 95% of all new releases.

The surge has been driven by fast advances in video-generation models and production tools that allow creators to convert an entire novel into a finished short drama with minimal manual effort. Production costs for AI short dramas have fallen by roughly 90% compared to live-action equivalents, with a polished AI production now costing under 200,000 yuan versus around 1.5 million yuan for a traditional live-action series.

Traffic Costs Are Eating Into Profits

That cost collapse has not translated into broader profitability. Because production itself makes up only a small share of total spending, the real battleground has shifted to advertising and audience acquisition, which now account for roughly 70% of total outlays. 

As a flood of AI-made dramas competes for the same pool of viewers, the cost of reaching 1,000 impressions has more than doubled year-on-year, while revenue per 1,000 views has dropped from around 60 yuan in late 2025 to just 15–30 yuan now — nearly halving returns even as advertising spend climbs.

The combination of soaring acquisition costs and falling per-view revenue has squeezed margins industry-wide. Top-tier production companies are still largely profitable thanks to higher-quality output and more professional operations, but mid-tier firms now see profitability rates of only 3–5%, and companies below that tier rarely exceed a 2% chance of turning a profit. 

The “hit rate” for breakout success has also collapsed: among newly released AI comics-style dramas fewer than 1 in 1,000 titles becomes a breakout, a success rate below 0.1%.

Industry figures cited in the report, including executives from Beijing Jutou Technology and Banshui Technology, suggest the sheer volume strategy — flooding platforms with low-cost content and betting on probability for hits — has reached its practical limits. 

Rising token costs, tightening platform content review, and new regulation taking effect July 1 — the National Radio and Television Administration’s classification standard for AI micro-dramas — are expected to push the industry away from a “volume over quality” approach and toward more selective, higher-quality production as the sector matures.

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