Analysis of the 2025 Outbreak Trend of the Short Drama Market and Performance Realization Risks of Concept Stocks

Based on public market information and industry data [1][2][3], China’s short drama market showed significant growth in 2025, and related concept stocks face opportunities and challenges in performance realization. The following is a systematic analysis from four dimensions: market size, competitive landscape, core company financial performance, and risk factors.

China’s micro-short drama industry is in a period of rapid expansion. According to industry data, more than 30,000 micro-short dramas were produced in China in 2024, achieving total revenue of about 50.4 billion yuan, which has exceeded the movie box office revenue of the same year [2]. Short dramas present emotional climaxes intensively in extremely short lengths of 30 to 90 seconds, using highly recognizable routines such as “contract marriage” and “class reversal” to form a highly addictive viewing experience.

In overseas markets, Chinese-style short drama platforms represented by ReelShort have performed particularly prominently. In the first quarter of 2025, ReelShort recorded $130 million in in-app purchase revenue, with a market share of 24.21% in the short drama market [1]. The app’s monthly downloads reached 14.486 million in May 2025, surpassing traditional streaming giants like Netflix and HBO for two consecutive months, with strong download growth momentum.

However, the rapid growth of the market is accompanied by intensified competition. Short drama platforms adopt the “pay-to-unlock” model. If users want to watch the entire work at once, the cumulative cost is usually between $15 and $25, and the cumulative views of some popular works can exceed 470 million [1].

As an A-share online literature and digital publishing enterprise, Chinese Online is an important source of the content system behind ReelShort. The company indirectly participates in overseas short drama business through its joint venture CMS, with a shareholding ratio of about 49%.

From the perspective of financial performance, Chinese Online faces significant performance pressure. In the first half of 2025, the company’s operating revenue increased by 20% year-on-year to 556 million yuan, but the net loss in the same period reached 226 million yuan, expanding by 50.8% year-on-year [1]. The main reason for the expanded loss is that its invested CMS business turned from a profit of 22.93 million yuan in 2024 to a loss of 46.51 million yuan in the first half of 2025. The main reason for CMS’s loss is the increase in delivery costs due to intensified market competition, and the company increased marketing investment to compete for market share.

It is worth noting that Chinese Online has no longer consolidated CMS into its financial statements since May 2023, with its shareholding ratio dropping from 50.9% to 47.81% and voting rights to 47.81% [1]. Although this arrangement helps reduce geopolitical risks, it also means that the listed company’s control and direct benefits from the core business segment have been weakened.

From the perspective of stock price performance, Chinese Online’s A-share stock price has fallen by about 3.9% cumulatively since 2025, significantly underperforming the broader market [1]. The main reason for the market’s cautious attitude towards its financial performance is that the company has not yet proven that it has sustainable profitability, and overseas business is still in a high-investment period.

China Literature’s 2024 annual results show that the company achieved total revenue of 8.1211 billion yuan, an increase of 15.8% year-on-year [2]. Among them, IP operation and other income reached 4.0905 billion yuan, a significant increase of 33.5% year-on-year, mainly due to the increase in the number of hit dramas, movies and animations launched, and the expansion of IP authorization adaptation business scale. New businesses such as short dramas and IP derivatives also showed significant growth.

However, the company’s profitability is under pressure. Measured in accordance with International Financial Reporting Standards, the loss attributable to equity holders of the company in 2024 was 209.2 million yuan, compared with a profit of 804.9 million yuan in 2023 [2]. Operating loss was 336.1 million yuan, compared with operating profit of 709.3 million yuan in 2023. Sales and marketing expenses increased by 31.5% year-on-year to 2.261 billion yuan, mainly due to the increase in promotion and advertising expenses related to movies and TV dramas released in 2024.

Star Legend is known as the “first stock of star IP” because Ye Huimei, Jay Chou’s mother, is the company’s controlling shareholder. The company’s business covers two major sectors: IP creation and operation, and new retail, using star IP such as “Zhou Tongxue” for commercial monetization. In 2024, the sales of “Zhou Tongxue” co-branded products exceeded 1 billion Hong Kong dollars [3].

Recently, due to Jay Chou’s entry into Douyin with the “Zhou Tongxue” IP, Star Legend’s stock price once soared by twice the highest single-day increase, hitting a new high since its listing [3]. However, this stock price increase is more driven by market sentiment and short-term events rather than substantive improvements in fundamentals. The company’s original “commercial closed-loop” model—using its own IP to drive sales of its own brands—faces the challenge of how to combine with the demand for in-depth story content under the new content trend.

Based on the above analysis, short drama concept stocks face the following core risks:

The case of Chinese Online shows that although the short drama market is growing rapidly, related companies may not be able to achieve synchronous profit improvement. As the operating entity of ReelShort, CMS turned from profit to loss in the first half of 2025, indicating that intensified industry competition has put significant pressure on profit margins [1]. Chinese Online’s loss expanded by 50.8% in the first half of 2025, indicating that during the market expansion period, the company still needs continuous investment to maintain competitiveness, and short-term profitability is difficult to verify.

The rapid growth of short drama business requires a lot of marketing investment and content production input. China Literature’s sales and marketing expenses increased by 31.5% year-on-year in 2024, and the proportion of revenue increased from 24.5% to 27.8% [2]. This high-investment model means that the company needs to continue to bear cost pressure, and there is uncertainty whether revenue growth can cover the increase in costs.

Current short dramas rely heavily on fixed routines such as “time travel”, “rebirth”, and “class reversal” [2][3]. With the surge in the number of works on the supply side of the market (over 30,000 in 2024), the problem of content homogenization has become increasingly prominent. Users may become fatigued with existing routines, thereby affecting the platform’s user retention rate and willingness to pay.

The supervision of the micro-short drama industry continues to tighten, and content review standards are constantly improving. Policy changes may affect the work launch cycle and content production costs, thereby affecting the business expansion and profitability of related companies.

Star Legend was hyped by the market due to Jay Chou’s IP entering Douyin, and its stock price soared in the short term [3], but the company’s fundamentals have not improved substantially. This deviation between valuation and fundamentals means that investors may face greater callback risks.

The short drama market did show an outbreak trend in 2025, with rapid industry scale expansion and outstanding overseas market performance, but the performance realization risks of related concept stocks cannot be ignored.

From an investment perspective, the following points are worth paying attention to:

1. Profit Verification First
   : The financial data of Chinese Online and CMS show that market growth may not translate into company profits. Investors should focus on targets with sustainable profitability and healthy cash flow status.

2. Beware of Valuation Bubbles
   : For companies whose stock prices have risen sharply driven by short-term events (such as Star Legend), it is necessary to carefully evaluate the matching degree between valuation level and fundamentals.

3. Focus on Competitive Landscape Evolution
   : With intensified industry competition, companies with differentiated competitive advantages, high-quality IP reserves and efficient content production capabilities are more likely to win in the industry reshuffle.

4. Diversify Investment Risks
   : The proportion of short drama business in the company’s overall revenue varies. Investors should comprehensively consider the company’s diversified business layout and avoid over-concentration in a single concept sector.

To sum up, the high growth trend of the short drama market provides development opportunities for related companies, but performance realization faces multiple challenges such as profitability, competitive landscape, content homogenization and regulatory policies. When investing in such concept stocks, investors need to maintain a cautious attitude, deeply analyze the company’s fundamentals, and avoid blind chasing of rising prices.

[1] Yahoo Hong Kong Finance - “After Chinese Soap Operas Conquer the US, Chinese Online’s Next Stop: Hong Kong” (https://hk.finance.yahoo.com/news/中式肥皂劇征服美國後-中文在線的下一站：香港-232625817.html)

[2] Yahoo Hong Kong Finance - “China Literature Announces 2024 Annual Results” (https://hk.finance.yahoo.com/news/閱文集團公佈2024年年度業績-083100568.html)

[3] Yahoo Hong Kong Finance - “Analyzing the Operating Trends Reflected Behind Star Legend as Jay Chou Enters Douyin” (https://hk.finance.yahoo.com/news/拆解周杰倫進駐抖音巨星傳奇背後折射的經營趨勢-233040004.html)