AI Floods China's Microdrama Market as Creator Pay Falls and Studios Cut Back

Cheaper dramas, a harder living

China released 430,000 microdramas in the first eight months of 2026, with more than 90% generated by artificial intelligence, according to figures announced by the National Radio and Television Administration on September 17. Production has become dramatically cheaper. Earning a living from those productions has become harder.

On Douyin, creators now receive about 5 to 10 yuan for every 10,000 views through advertising revenue sharing, following a reported decline of roughly 90% in payments over a year. At that rate, even a million views brings only 500 to 1,000 yuan. For a production costing 50,000 yuan, recovering that expense through those payments alone would require between 50 million and 100 million views.

DataEye, an industry data provider, found that only 1.3% of 221,900 AI microdramas added to Douyin in the first half of 2026 reached its benchmark of 50 million views for recovering costs. That is roughly one production in 77. Its research also found that 93% of AI animated dramas received fewer than a million monthly views.

The squeeze is reaching companies that once expanded rapidly. Soy Sauce Culture founder Huang Haonan said his team had contracted from about 1,500 people to several hundred. Around 150 of its productions, representing approximately 12 million yuan in costs, were unable to launch on platforms.

China's AI drama boom now presents a difficult business equation: software makes it easier to create a show, while an expanding mountain of shows makes it harder to attract viewers. Creators are turning to overseas audiences, brand advertising and merchandise, bringing new expenses and disputes over what virtual performers can truthfully sell.

How quickly did production grow?

The National Radio and Television Administration's figures put the January to August output at about 13 times the total for all of 2025. Approximately 220,000 of those productions appeared on Douyin. A later October 20 report attributed to the administration put nationwide releases through September at 490,000.

The China Netcasting Services Association's quarterly guidance recorded 128,000 microdramas in the first quarter, including about 122,000 made with AI. That gives AI a share of roughly 95%, consistent with its dominance in production even as individual measurements cover different periods and platforms.

China already had more than 800 million microdrama viewers, and the broader market was worth more than 100 billion yuan in 2025. Microdramas are series with brief episodes, generally under 20 minutes, designed for viewing on phones. Their short running times allow stories to move quickly through romantic confrontations, family disputes and reversals of fortune.

Several dates show how production growth and commercial pressure developed together:

• First quarter of 2026: About 122,000 of 128,000 new microdramas were generated with AI, according to association figures.
• April 7: Hongguo began a campaign against low quality animated dramas, taking action against 3,522 productions within a week.
• June 12: The Laid-off Girl debuted on Douyin, helping establish virtual actress Fang Taozi.
• September 17: The broadcasting regulator announced that AI accounted for more than 90% of releases from January through August.
• October 16: China Literature disclosed that it had signed more than 5,000 individual creators and personal studios.
• October 20: The latest reported regulatory count reached 490,000 releases through September.

What AI saves, and what still costs money

Jiang Lan, creator of the apocalyptic drama Guixu, described a production of 12 episodes averaging eight minutes each, with computing expenditure close to 200,000 yuan. Jiang put the average computing cost at under 2,000 yuan per minute. The figures were approximate and covered computing expenditure rather than every expense involved in running a production business.

Creators frequently use Seedance 2.0, ByteDance's video generation model. They write detailed instructions describing characters, movements, locations and visual styles, then revise the results. Tokens are units used to measure AI processing and billing; generating another version consumes more computing resources and adds to the bill.

A single usable scene can require many attempts. One production costing about 100,000 yuan reportedly generated a particular shot 97 times before settling on 15 seconds of footage. Keeping a face, costume or movement consistent across a story requires considerable human selection and editing.

Production budgets vary widely. DataEye Research Institute director Liu Zun put some AI dramas at 30,000 to 50,000 yuan, compared with about 600,000 yuan for a drama filmed with actors. Other industry estimates place complete AI productions at 50,000 to 240,000 yuan against 500,000 to 1.5 million yuan for productions using human performers. A much higher estimate of about 80,000 yuan per minute has also circulated, illustrating the wide range of work grouped under the same label.

Qin Wenshan, a former rail transit safety officer who moved into AI filmmaking, completed the science fiction animated short PandaPawz with his team in 28 days for around 30,000 yuan. He described how the tools had changed the division of work:

"Film and TV production used to be a massive team effort. Now, one person can do the work of an entire department, with AI as the backbone," Qin said.

Why more shows bring less income

Douyin's September figures showed that just 8.5% of microdramas exceeded a million views. An industry study covering AI drama production and overseas expansion estimated that AI accounted for 95% of output but only 4% of viewing, with dramas featuring human performers attracting roughly 25 times as many views.

Individual AI hits still break through. In July, four of the top five titles on Hongguo's main popularity ranking were AI animated dramas. A platform chart measures the leaders, however, while the viewing figures describe the much larger pool competing beneath them.

Creators face two pressures at once: fewer views for most productions and lower payments for each view. DataEye put earlier advertising revenue at 30 to 100 yuan per 10,000 views, compared with the current 5 to 10 yuan. A studio therefore needs much more viewing to earn the same amount as before.

Liu estimates that only 0.5% of domestic AI animated dramas become hits exceeding 100 million views. Companies respond by making many shows, testing audience reactions and directing promotion money toward those that perform best. Advertising systems can stop spending quickly when revenue looks too low relative to the cost of attracting viewers.

That approach spreads the chance of success across a catalogue. For a small creator paying for one or two productions, an unsuccessful release can absorb most of the available budget.

A factory model comes under pressure

Soy Sauce Culture built its expansion around small production units working in parallel. Teams of three to five people could finish projects in five to ten days, and the business divided work among roughly 50 to 60 studios. Its ambition was to raise monthly output from about 100 productions to 1,000.

Huang's estimate of a workforce falling from approximately 1,500 to several hundred accompanies another reported staffing count of more than 1,200 declining to more than 600. Both describe a substantial contraction. The company also halved its forecasts for 2026 revenue and net profit, previously set at 1 billion yuan and 200 million yuan respectively.

Industry figures show similar pressure beyond one company. Active contractors producing AI animated dramas fell from 1,216 in the first quarter to 698 in the second, a decline of about 43%. Reported contract prices dropped from 3,000 to 5,000 yuan per minute in 2024 to 500 to 1,000 yuan.

Audience engagement weakened as supply expanded. Industry statistics put completion rates, the share of viewers who finish watching, at 19%, down from 42%. Repeated plots about domineering bosses, reincarnation and sudden reversals of fortune have made it harder for another similar production to hold attention.

Platforms tighten the gate

Hongguo's campaign added another obstacle for producers counting on rapid releases. After its April enforcement action, the platform intercepted or removed 20,941 low quality animated dramas in May. Many affected productions were stopped during review before reaching viewers.

The platform's checks covered copyright infringement, copying, vulgar material and unsuitable portrayals involving children. The Measures for the Administration of the Development of Micro Short Dramas, reported to have taken effect in September 2026, also set requirements for content review and labeling material generated by AI.

Studios consequently need to budget for more than generation and editing. They must establish rights to stories and images, check sensitive content and meet platform requirements before a completed show can earn money.

China's broadcasting regulator has also publicly supported human performance. Wang Xiaoliang, an official with the National Radio and Television Administration, set out that position at a September news conference:

"Our position is clear: live-action dramas are the mainstay of quality productions and should receive strong support," Wang said.

Virtual stars find brands, and controversy

Falling payments from views have encouraged product placement, ranging from a brand logo in the background to a character directly promoting an item. Successful series can add episodes built around a sponsor. Virtual performers can also maintain separate social media accounts and sell advertising outside their dramas.

Fang Taozi shows how that business can develop. After The Laid-off Girl launched in June, her Douyin account had more than 510,000 followers by August 25. A fashion publication previewed her on its official Weibo account on August 27, extending her reach beyond drama viewers.

Reported advertising rates listed on Douyin's Xingtu platform ranged from 168,000 yuan for a Fang Taozi video lasting up to 20 seconds to 258,000 yuan for one longer than a minute. Actual fees and earnings were not disclosed.

Hou Wenjie, secretary general of Yu Ce Think Tank, identified regular account activity, audience loyalty and predictable production as reasons brands might pay for virtual characters. Cooking, fitness and commuting videos can give a fictional personality a recurring place in followers' daily routines.

A contact lens promotion exposed the limits of that approach. Fang Taozi appeared in an 11 episode drama released in June and claimed comfort after wearing real contact lenses throughout a day. Thousands of viewers complained to market regulators, alleging false advertising. An advertisement featuring the character was reportedly removed over concerns that its claims could mislead consumers; no regulatory decision or penalty was specified.

A virtual character has no eyes and cannot experience comfort. The dispute centers on a concrete consumer issue: presenting a simulated character's words as personal experience of a real product.

Merchandise offers another route. An AI character named Duan Yan, operated by Buming Culture, helped promote a bracelet matching one worn in a drama. Sales on a single platform exceeded 10,000 units and 1 million yuan. Here, the business earns from viewers buying an object associated with a story.

Overseas audiences come at a price

Chinese companies are seeking viewers abroad, where subscriptions, episode purchases and advertising provide different ways to earn. Liu estimates that approximately $20 million is spent each day across the overseas short drama business. An industry study put spending to attract viewers at about half of total overseas expansion costs, with each acquired user in North America costing $5.28.

ReelShort generated $332 million in purchases within its app in 2025. AI's place in its business is growing: one industry estimate put AI at 35% of its content, while Liu said AI's share of new releases rose from below 5% in the first half of 2026 to 90% in September. The figures cover different portions of its catalogue.

DramaBox has a reported reserve of 100,000 online fiction properties, with locally adapted productions accounting for 40% of its dramas. Kunlun Tech operates across production and distribution through SkyReels, SkyProduction, DramaWave and FreeReels. ByteDance's PineDrama adds competition through free viewing supported by advertising.

Southeast Asia presents several distinct markets. DataEye recorded 411 million microdrama app downloads in Indonesia during the first three quarters of 2026, or 56.77% of the ASEAN total. Indonesia, the Philippines and Vietnam lean toward free viewing, while Singapore, Malaysia and Thailand have stronger payment markets. Thailand led ASEAN revenue from purchases within these apps.

Translation alone leaves expensive problems unresolved. Tongli Law Firm partner Yang Xun warned that a purchased script may carry Chinese adaptation rights without permission for global distribution or versions in other languages. Changing names and dialogue can still leave protected character relationships and plot structures intact.

Payment disputes can also erase earnings. Airwallex regional business executive Li Zhiqiang said a disputed card payment can bring a processing charge of $15 to $20. Excessive disputes can lead to payment services being withdrawn and funds frozen for 90 to 180 days. Clear subscription notices become a practical part of keeping revenue.

Who gains work, and who loses it?

AI is opening production to people who previously lacked the money or connections to assemble a film crew. Creator Li Nan formed a team of two in April and built an account with more than 140,000 followers. China Literature chief executive and president Hou Xiaonan said on October 16 that its ten highest earning individual production businesses each generated annual income above 1 million yuan.

Actors face a different calculation. Peking University estimated that 32,000 actors and more than 200,000 extras participated in microdrama filming in 2025. Li Xiaolong, a Shanghai Theatre Academy student and actor, said even daily jobs that once paid more than 1,000 yuan had become difficult to obtain.

Li sees stronger protection for stage acting, where performers must sustain live interaction with an audience. Moving from screen work into plays or musicals requires its own training and skills, however.

Some companies are combining the technologies. iQIYI premiered the AI feature Mystic Tales: The Spider Lady's Vendetta, running more than 60 minutes, in July and announced Immortals Over Mortal Love, a series mixing AI production with professional actors. Chief executive Gong Yu has supported this combined approach.

DataEye projects China's AI drama and animation market at 40 billion yuan in 2026, up 138%. Capturing that growing spending will depend on finished stories, reliable rights and an affordable route to audiences. For creators, a cheaper production bill helps most when a show can reach viewers and keep them watching.

Key Points

• AI generated more than 90% of China's 430,000 microdramas released from January through August 2026, according to regulatory figures.
• Douyin creators receive about 5 to 10 yuan per 10,000 views, putting pressure on productions with limited audiences.
• Only 1.3% of AI microdramas in a DataEye study reached its benchmark of 50 million views for recovering costs.
• Soy Sauce Culture cut staffing and halved its annual revenue and profit forecasts.
• Virtual characters are attracting advertising and merchandise sales, alongside complaints about misleading product claims.
• Overseas expansion brings substantial advertising, copyright and payment expenses, while human actors face fewer opportunities in some screen productions.