AI Short Dramas Take 55% of China's Token Use as Studios Face a Profit Squeeze

A production boom with a growing computing bill

AI short dramas and video generation account for 55% of domestic AI token consumption, Chinese Online told investors in June 2026, putting video ahead of e-commerce and marketing at 24% and software development at 15%. The remaining 6% goes to other uses. On those figures, video consumes about 3.7 times as many tokens as software development.

The entertainment company's disclosure captures a shift in China's AI business: generating moving images has become a major source of demand for computing. Studios use AI to write scripts, create characters, generate scenes, dub dialogue and prepare advertisements. Each stage can involve repeated requests to a model, especially when a director needs another version of a shot.

The commercial attraction is straightforward. Producers can make dramas faster and, in many cases, for much less money than filming with actors. Yet the savings are arriving alongside intense competition, short promotional windows and pressure on payments to studios. DataEye figures put the number of active AI short drama production companies at 698 in the first quarter of 2026, down from 1,216, a decline of about 43%.

China already supplies most of the world's microdrama business. A study prepared by researchers from the Development Research Center of the National Radio and Television Administration, Future TV and DataEye estimates that China's market exceeded $14 billion in 2025, within a global market approaching $18 billion. The combination of a large audience and cheaper production is driving demand for AI, while leaving individual creators in a much tougher contest for income.

Why video uses so many tokens

A token is a unit an AI system uses to process information. In a text model, it can represent a word, part of a word or punctuation. Image and video systems process visual information through their own representations. Providers can use these units to measure usage and calculate charges, although counting methods vary between models.

Chinese Online attributes video's high consumption to the demands of generating images over time and the speed at which production systems process tokens. Photorealistic dramas at 1080p typically consume two to three times as many tokens as animated dramas at 720p, according to the company. Higher resolution means the system has more visual detail to produce.

Directors also need usable performances, consistent characters and convincing movement. Production workers repeatedly generate versions of the same shot, then select the best result. A sequence that lasts only seconds on screen may therefore require several attempts. Chinese Online puts computing costs for a drama with 12 episodes at nearly 200,000 yuan in some productions.

China's National Data Administration has described a much broader expansion in AI usage, saying daily processing reached 140 trillion tokens, compared with 100 billion at the start of 2024. Liu Liehong, the administration's head, explained the commercial role of tokens at a State Council press conference in March:

the settlement unit linking technological supply with commercial demand.

For studios, the practical calculation is the cost of producing footage that can actually be released. A cheaper generation attempt can still lead to a large bill if workers must repeat it many times. Efficient tools, good visual planning and experienced directors can therefore matter as much as the advertised price of a model.

China leads a market measured in billions

The study presented on April 16 at a forum on digital intelligence and innovation in new popular literature and arts puts China's share of the 2025 global microdrama market at 77.78%. It estimates the market outside China at $3.6 billion, with Chinese companies contributing about 90%, equivalent to roughly $3.24 billion.

Market estimates vary substantially. The study places the global total near $18 billion in 2025, while research firm Omdia estimates $11 billion for that year and projects $14 billion by the end of 2026. The published accounts give no reconciliation of the market definitions behind those totals.

Chinese companies also dominate the largest overseas apps. The April study says the 10 leading platforms by overseas purchases inside apps all have Chinese backgrounds. Their combined revenue from those purchases was about $1.65 billion in 2025, equivalent to 45.83% of the estimated $3.6 billion overseas market.

Microdramas are built for phone screens, often with episodes lasting one or two minutes. A viewer can finish an entire series in roughly 30 minutes to an hour. Platforms commonly offer initial episodes free, then charge to unlock more, sell subscriptions or earn money from advertising. Cliffhangers serve a direct commercial purpose: persuading viewers to continue watching.

How quickly production has expanded

DataEye counted an average of 470 new AI short dramas released daily in January. Later industry accounts describe output exceeding 1,500 titles a day. Chinese production estimates for 2026 point to more than one million AI dramas and animated dramas, although categories and counting periods vary across industry tallies.

The expansion has developed alongside a broader move into international distribution and automated production:

• 2024: China's short drama market generated roughly $6.9 billion, exceeding domestic cinema box office revenue.
• 2025: Kunlun Tech began producing AI dramas; the April industry study estimates the overseas AI drama and animated drama market reached $100 million.
• First quarter of 2026: Overseas short drama apps generated an estimated $602 million in purchases inside apps and 689 million downloads.
• April 16: Researchers presented their global microdrama study and DataEye released its quarterly overseas market findings.
• June 2026: Chinese Online disclosed its estimate that AI short dramas and video generation accounted for 55% of domestic token consumption.

Kunlun Tech now offers more than 1,000 AI titles on its platforms, while StoReels has set a target of producing 100 AI dramas a month. Those company plans show how production is moving from individual experiments toward a continuous supply of new series.

Cheaper shows, different production choices

FlexTV vice president Tang Tang says AI can reduce the cost of producing a short drama in North America by 80% to 90%, from a conventional budget of roughly $200,000. That would put the reduced budget at approximately $20,000 to $40,000. Production that previously took three to four months can take less than one month, according to Tang.

Other Chinese production accounts describe AI dramas costing less than 50,000 yuan, compared with 300,000 to 400,000 yuan for a relatively inexpensive drama filmed with actors. More ambitious conventional productions can cost 1 million to 1.5 million yuan. Budgets differ with length, visual quality, staffing and the number of generated shots that must be replaced.

FlexTV has shifted entirely to AI dramas after halting traditionally filmed productions. Kunlun Tech is pursuing a mixed approach, continuing to invest in actors and conventional filming while using AI to test genres and ideas at lower cost.

Han "Daniel" Fang, Kunlun Tech's chief executive, described the company's intended balance:

We want to bring the amount of AI work to 20% of the platform,

AI is especially useful for fantasy and science fiction, where invented creatures and impossible settings would otherwise require expensive effects. DataEye finds overseas AI dramas leaning toward fantasy themes, while dramas featuring actors remain more closely associated with romance, revenge and emotional conflict.

A larger audience, slower revenue growth

Overseas short drama apps recorded an estimated $602 million in purchases inside apps in the first quarter of 2026, up 8% from a year earlier, according to figures presented by DataEye founder and chief executive Wang Xiangbin. Downloads rose much faster, increasing 80% to 689 million.

Those growth rates show a business gaining users faster than spending. DataEye attributes part of the gap to the growing role of apps funded by advertising, or by a mixture of advertising and viewer payments. Their revenue appears in different channels from purchases made inside apps.

The United States, Japan and Britain together supplied 46% of overseas revenue from purchases inside apps. Developed markets contributed more than 60%, while India, Latin America and Southeast Asia supplied more than 70% of downloads. Producers consequently face different commercial choices: attract viewers who pay directly, or build large audiences whose viewing can support advertising.

Revenue is concentrated among a small number of platforms. The leading 20 apps collected about $552 million, roughly 92% of the quarterly total. DramaBox and ReelShort held the strongest positions. DataEye separately projects that the overseas AI drama and animated drama market could rise from $100 million in 2025 to $650 million in 2026, or 6.5 times its previous size, with active users already exceeding 150 million.

Studios have only days to find viewers

Creators describe an initial promotional window of about three days for a new drama. Platforms and distributors spend to attract viewers, assess the response and redirect advertising money if a title performs poorly. Producing a finished series is therefore only one part of recovering its cost.

One screenwriter estimated that about 0.4% of AI dramas become hits, equivalent to roughly four in every 1,000 titles. That is an individual industry estimate rather than a measured success rate for the entire market. It nevertheless reflects the financial pressure described by producers operating amid a flood of releases.

Tang, the FlexTV vice president, described the expectation for quick returns:

In China, if a series doesn't break even within a month, the industry considers it a failure.

Yue Qiaochu, a former ByteDance employee who founded an AI content studio in Beijing in late 2024, has described tight margins, uncertain payments and limited opportunities to expand. His experience connects two sides of the boom: AI lowers the expense of making content, while the competition to secure paying work and audiences remains severe.

The fall in active producers from 1,216 to 698 during the first quarter of 2026 amounts to 518 fewer companies. Large output and rapid business turnover are occurring together, making the industry's computing demand a more visible success than the finances of many studios.

Creative work moves from the set to the screen

AI production replaces some filming tasks with work selecting digital assets, writing detailed instructions and checking generated footage. A role known as chouka shi, literally "card drawer," involves breaking scripts into shots and repeatedly generating clips until a usable version appears. The name reflects the uncertain result of each attempt.

Some advertised or reported salaries for this work are as low as 3,000 yuan a month, despite demanding output targets. Directors need enough knowledge of composition, lighting, movement and editing to describe the desired result precisely. FlexTV's Tang says a production team can shrink to about 10 people.

Phoenix Zhu, a freelance screenwriter in Suzhou, sold her first short drama script in April 2025 for around 20,000 yuan. She later described two projects being canceled while contracts were being arranged, falling rates and the disappearance of expected pay increases. Her account shows how quickly the production shift can reach writers, even when scripts remain part of the process.

Distribution platforms occupy several positions in the same business. A studio can generate footage with ByteDance's Seedance, edit it with Jianying, distribute through Hongguo and buy promotion through Qianchuan. Studios also face changing payment terms: Hongguo reduced revenue sharing coefficients for some AI drama categories in April 2026. That gives production companies another variable to manage alongside computing bills and advertising costs.

What will determine the next stage

Chinese Online argues that producing refined AI dramas at scale can create a commercial and technical advantage. A studio that obtains usable footage with fewer attempts can control costs while maintaining quality. Repeating that process across many series gives experienced teams a potential advantage over new entrants.

International expansion also requires more than translating dialogue. DataEye says locally produced content reached 28% of the overseas AI drama and animated drama market in March 2026. The April industry study calls for better content quality and more production adapted to local audiences as companies from the United States, Japan, South Korea and Europe enter the business.

Japan's microdrama market reached an estimated $400 million in 2025, while South Korea's was estimated at $490 million in 2024. These markets offer paying audiences and established creative industries. Chinese producers are competing for viewers in countries whose own broadcasters, animation companies and drama platforms are also developing the format.

The central business test is whether a studio can turn lower production costs into dependable earnings. Chinese Online's token figures show strong demand for AI services. The revenue concentration, rapid promotional cycle and shrinking producer count show why the next stage will depend on audience access, consistent quality and payment terms as much as on generating more footage.

Key Points

• Chinese Online says AI short dramas and video generation consume 55% of domestic AI tokens, compared with 15% for software development.
• Repeated generation and higher image resolution can make computing a substantial production expense.
• A study estimates China's 2025 microdrama market exceeded $14 billion, within a global market approaching $18 billion; Omdia puts the global total at $11 billion.
• Overseas app purchases rose 8% to $602 million in the first quarter of 2026, while downloads increased 80% to 689 million.
• AI can cut production budgets sharply, but studios face intense competition and promotional windows of about three days.
• DataEye figures show active AI short drama producers falling from 1,216 to 698 during the first quarter of 2026.