The rapid rise of Hongguo Short Drama has sounded the alarm for long-form video platforms. Regardless of whether it's long-form or short-form content, only user acceptance can ensure survival.

Unexpectedly, Hongguo Short Drama has risen within just one year, bringing significant survival pressure to long-form video platforms.

In August 2023, the Hongguo Short Drama app quietly launched. At that time, short dramas were mainly viewed through mini-programs, and Hongguo's emergence was like a pebble dropped into a calm lake, causing little disturbance.

Around the same time, due to a keen sense of smell, Zhang Yi, the chief analyst at iiMedia Research, felt that a short drama app could be an opportunity and suggested that long-form video platforms launch separate apps. However, long-form video platforms dismissed this idea, firmly believing in the appeal of high-quality horizontal screen content to users, underestimating the development of short dramas and not believing that their user bases would overlap or conflict.

The situation began to change in March this year. According to data released by the third-party organization QuestMobile, in March 2024, Hongguo Short Drama ranked sixth in the online video industry with 54 million monthly active users, but its average daily usage time per user was about 1.38 hours, surpassing major long-form video platforms like iQIYI, Youku, Tencent Video, and Mango TV.

By September this year, Hongguo Short Drama had even more momentum, with 120 million monthly active users, a year-on-year increase of 1045.9%, firmly securing the top spot in the industry. Some media even reported that Hongguo Short Drama's daily active users had surpassed 50 million, with the goal of reaching 100 million.

How did Hongguo Short Drama achieve such a remarkable rise in just over a year?

'Come watch short dramas on Hongguo, not only are they all free, but you can even earn money.'

In June this year, under the recommendation of a friend, Ma Yu successfully became hooked on Hongguo Short Drama. Previously, she also loved watching short dramas but was reluctant to pay for them, often searching for resources on cloud storage, a cumbersome and time-consuming process.

Hongguo Short Drama solved this problem. By simply downloading the app, Ma Yu could watch a vast amount of short dramas, including hits like "Luring Her In" and "Darkness Without Light." Moreover, by signing in daily and completing tasks while watching short dramas, she could earn diamonds, which could be cashed out once a certain amount was accumulated. This delighted Ma Yu, who now spends countless hours watching on her phone every day.

Free access is Hongguo Short Drama's primary attraction to users, but it's not their only advantage. Besides Hongguo, there are many other free short drama viewing apps on the market, such as Hippo Theater, Xingya Short Drama, Wild Elephant Theater, XiFan, and Wheat Field Short Drama. Among them, Jiuzhou's Xingya Free Short Drama also performed well, ranking seventh in online video industry monthly active users in March this year.

Why did Hongguo Short Drama achieve a clear first place in September this year?

Internet industry analyst Zhang Shule analyzed for 'Xinshang' that this is inseparable from the support of the entire ByteDance software traffic matrix behind Hongguo Short Drama, especially since most short drama app companies are currently small and medium-sized enterprises.

It is understood that Hongguo's development company is Beijing Bimo Liuxiang Technology Co., Ltd. (hereinafter referred to as 'Bimo Liuxiang'), which is 100% owned by Beijing Douyin Information Services Co., Ltd. In addition, according to the 'Economic Observer', before Hongguo's launch in 2023, ByteDance made emergency adjustments internally, transferring employees from Tomato Novel to work on short dramas, allowing them to focus most of their energy on short dramas. At the same time, substantial traffic and commercial support were provided to Hongguo.

'Hongguo Short Drama and ByteDance's businesses like Douyin and Tomato Novel form an ecological complement to a certain extent,' said Zhang Shule. For example, most of the content on Hongguo Short Drama is authorized and filmed by Tomato Novel. Another example is that when users encounter short drama clips authorized and filmed by Tomato Novel on Douyin, they are recommended to download the Hongguo Short Drama app by clicking on the link.

▲Photo/Hongguo App Screenshot

Moreover, being backed by ByteDance also gives Hongguo the ability to 'spend money.' Although Hongguo can obtain considerable traffic through Douyin and Tomato Novel, the core of retaining users still lies in content, i.e., whether the content is of sufficient quality and abundance, and the 'spending money' ability helps facilitate this rapid realization.

On the one hand, Hongguo Short Drama acquires high-quality existing dramas, such as "Darkness Will Fade" and "Luring Her In." In this way, producers can sell the dramas to Hongguo Short Drama for a second time after the investment period ends and recharges slow down or stop growing, earning a copyright fee, while Hongguo can accumulate a batch of high-quality short dramas that have been tested by the market at a low price.

On the other hand, relying on the vast IP library of Tomato Novel, Hongguo Short Drama extensively cooperates with short drama production companies to adapt their content into IP short dramas, enabling rapid content updates. Yuan Zichao, head of copyright cooperation at Hongguo, mentioned in November 2024 that Hongguo currently releases over 1,000 new short dramas each month, with a total of over 15,000 short dramas available.

Behind such a huge update volume is the generous remuneration Hongguo Short Drama provides to its partners. Screenwriter Wang Qi told 'Xinshang' that the IP adaptation script fees provided by Hongguo Short Drama to screenwriters usually range from 15,000 to 100,000 yuan, and their subsequent revenue-sharing ratio is more generous compared to other platforms. More attractively, relying on existing novel plots for adaptation saves time and effort compared to original creation but does not compromise earnings, which can even be higher.

In other words, a free platform is a process of continuously burning money and consuming traffic to gain development space, where the competition is about which company can invest more funds and traffic to gain an early advantage and achieve more rapid expansion and growth, and ByteDance is never afraid of this.

The micro-short drama market is still expanding. According to iiMedia Research, the market size of China's online micro-short dramas reached 37.39 billion yuan in 2023, an increase of 267.65% year-on-year; it is expected to exceed 100 billion yuan by 2027.

Although long-form video platforms are reluctant to admit it, short dramas are indeed eroding their market share, especially with the rapid rise of Hongguo Short Drama. An interesting detail is that at a film and television culture forum at the end of October, Gong Yu, the founder of iQIYI, directly stated, 'The entire industry should produce micro-short dramas rather than viewing them as a scourge.'

Earlier in September, iQIYI officially announced its entry into the micro-short drama industry, launching Short Theater and Micro Theater. The former has episodes ranging from 5 to 20 minutes, primarily in horizontal screen format, covering various genres such as historical romance, modern romance, and mystery. The latter has episodes around 1-5 minutes long, primarily in vertical screen format, focusing on male and female frequencies and the silver-haired demographic, and proposes to distribute more than 70% of the total revenue of a micro-short drama to the content producer.

This shows the urgency of iQIYI's desire to compete for the market.

Financially, the pressure is evident in a very straightforward manner. In the just-concluded third quarter, the financial reports of iQIYI and Mango Media showed a year-on-year decline in both revenue and net profit. Specifically, iQIYI's revenue decreased by 10% compared to the same period last year, and its net profit attributable to shareholders shrank significantly, with a year-on-year decrease of 51.8%. Mango Media's revenue situation was also not optimistic, with a year-on-year decline of 7.14%, and a year-on-year decrease in net profit attributable to shareholders of 27.41%.

Although Tencent Video and Youku have not released detailed independent financial data, insights can still be gained from their parent companies' financial reports. Alibaba Digital Media and Entertainment, which encompasses Youku and Alibaba Pictures, reported revenue of 5.694 billion yuan in the third quarter of this year, a 1% decrease compared to the same period last year. After adjustments, the segment was in a loss state, with a loss of 178 million yuan. Tencent's third-quarter financial report clearly stated that the number of paid members of Tencent Video was 116 million, a slight decrease of 0.85% from the previous quarter.

From a broader perspective, the entire domestic drama market is indeed shrinking. According to the '2024 Q1 Drama Market Report' by Light Data, the cumulative playback volume of the drama market in the first quarter was 25.683 billion, a decrease of 10.1% compared to the same period last year, with a 28.3% reduction in the number of popular dramas.

Lin Ming also felt that he opened Youku, iQIYI, Tencent Video, and Mango TV less frequently this year. 'I only take a look when there's a good drama, like the recent 'Eternal Night Galaxy' and 'Alley Folk,' otherwise, I watch short dramas,' Lin Ming confessed to 'Xinshang.' 'Rather than watching stinky and long domestic dramas, it's better to watch short dramas for relaxation. They have a fast pace and are satisfying.'

Zhang Yi pointed out that with internet traffic nearing its peak, platform traffic is showing a trend of one rising as another falls. As the short drama market expands rapidly, the film and web series markets are inevitably impacted because their audiences largely overlap.

According to iiMedia Research, short drama users are primarily aged 20 to 60, encompassing housewives, servers, workers, white-collar workers, retirees, and other groups. These individuals were also previous long-form drama users.

'The core issue of the long-form drama dilemma is that after the popularization of mobile phones and short videos, users' time has become more fragmented,' Zhang Yi analyzed. 'This is an irreversible trend that contradicts the horizontal screen and long-term immersion that long-form dramas rely on for survival. Moreover, long-form dramas have yet to explore a suitable business model.'

It can be said that the rapid rise of Hongguo Short Drama has sounded the alarm for long-form video platforms. Regardless of whether it's long-form or short-form content, only those that are well-received by users can survive and thrive. Deviating from user needs will inevitably lead to the demise of any enterprise, regardless of its size, as history has taught us.

In fact, not only long-form video platforms feel threatened, but short drama companies relying on the investment flow model also sense the danger.

Unlike the investment flow model, Hongguo Short Drama's profit model relies on advertisements, known as IAA (In-App Advertisement), where users watch short dramas for free, and the production side earns revenue through mid-roll ads, meaning users will see ads after watching a certain duration, such as an 8-second ad every 3 episodes.

This distinctly different business logic also poses different requirements for short drama content itself. Wang Qi has decades of experience in the film and television industry, having worked on scripts for the investment flow model and now primarily collaborating with platforms like Hongguo to write IP adaptations, occasionally mentoring newcomers.

He mentioned that the investment flow model requires strong emotional scripts that hook viewers and keep them watching, leading to payments. In contrast, the advertisement model pays more attention to script logic, coherence, and pacing, preferring that short dramas not be overly emotional to avoid losing viewers' patience during ads.

'Compared to finding screenwriters with experience in investment flow scripts, I prefer to cultivate newcomers because the former are accustomed to writing with strong emotions and have already formed their own style, unwilling to accept and explore the writing of IP adaptations,' said Wang Qi.

For investment flow companies, if Hongguo Short Drama grows larger and the market for short drama investment flows shrinks, their livelihoods may also be at risk since investment flows and advertisements are two completely different strategies.

However, due to factors such as the diversion of the holiday film market, rampant piracy, the rise of free short dramas, and an increase in entrants, the overall scale of short drama investment flows is indeed not as expected.

Earlier this year, DataEye's '2024 Micro-Short Drama Investment Flow Data Report' predicted that the scale of micro-short drama investment flows in China would be about 42 billion yuan in 2024. However, according to its '2024 H1 Micro-Short Drama Investment Flow White Paper,' the investment flow scale in the first half of this year was about 11.6 billion yuan, with an expected annual total of 25-30 billion yuan, a downward adjustment from the initial prediction.

Some media have reported that the daily consumption of IAA short dramas has increased to 20 million, accounting for about 30% of the overall short drama market. However, Zhang Yi believes that the current share of the IAA model in the overall short drama market is even higher and considers free short dramas to be the mainstream model of the future.

'As internet traffic peaks, internet companies cannot attract more new users solely through their original products to develop,' Zhang Yi told 'Xinshang.' 'The question is whether there is a large user base in the sector, and short dramas happen to have over 500 million users, so there is definitely room for significant growth in the future.'

Currently, Hongguo Short Drama is indeed a dark horse in the field of free short drama apps, temporarily leading the pack. However, the key to whether it can solidify its top position in the future lies in whether any competitors emerge. Zhang Yi believes that other players still have opportunities for now but that once Hongguo Short Drama's monthly active user base expands to 300 million, other players will basically have no chance. 'Generally, there are only about 2-3 leading players in a sector.'

As for long-form video players, Zhang Yi feels that short dramas will to some extent compress their living space but are unlikely to completely force them out. 'Old-era tickets won't get you on the new-era cruise ship. The dilemma facing long-form videos is still the profitability issue, and how to find a balance.'

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