The Chinese drama industry, spanning long-form series, micro-dramas, AI-generated content, and animated dramas, entered the first half of 2026 under the dual pressures of subdued macro consumption and rapid technological disruption, resulting in an unprecedented landscape of divergence.
Traditional long-form drama producers are mired in shrinking revenues and widening losses, while the short-drama and AI animated drama segments have crossed the one-trillion-yuan market scale, cementing their mainstream status. Financial reports from eight listed companies reveal a stark split in revenue performance: Bainaqiancheng, Lemon Studios, and Dasheng Times Cultural Investment Co., Ltd. each posted revenue growth exceeding 30%, driven primarily by short-drama operations. Conversely, Huace Film & TV, Strawbear Entertainment, and Cime Media saw revenue declines, with the sluggish long-form drama business serving as the primary culprit.
Profit disparities are even more pronounced. Some firms have achieved earnings rebounds through short-drama and AI-driven content, whilst H&R Century Union Corporation and Strawbear Entertainment remain entrenched in losses. AI animated dramas, an emerging category leveraging Kuaishou's Kling AI and Ocean Engine's AIGC toolchains, have dramatically lowered production barriers, attracting numerous smaller players. However, this influx brings challenges including content homogenization, declining gross margins, and heightened regulatory scrutiny.
Traditional studios retain a competitive edge in premium short-drama production and the industrialization of AI animated dramas, leveraging their intellectual property, scriptwriting expertise, and distribution networks. Ultimately, the pace of transformation and the effectiveness of cost management will determine each company's performance trajectory.
Divergent Performance Across Drama Companies, H&R Century Margins Turn Negative
During the first half of 2026, the industry's supply-side structural adjustment entered a critical phase. Following the implementation of new drama classification regulations in August 2025, differential management of long-form, medium-length, and short-form series has fueled significant supply-side shifts, with medium-length dramas now accounting for 30% of output and emerging as a new growth driver. Yet, the contraction of traditional long-form dramas remains unabated.
Production starts for long-form dramas across the four major streaming platforms continue to decline, while live-action short-drama production starts have plummeted by over 70% year-on-year, prompting numerous mid-to-small scale projects to halt voluntarily. With platform procurement budgets tightening and micro-dramas aggressively vying for viewer attention, the long-form drama sector is undergoing a phase of high supply, intense differentiation, and an intensified focus on quality.
According to Lighthouse Data, total drama content plays in the first half of 2026 reached 43.9 billion, a 21% year-on-year decrease, and down nearly 30% from the 62.3 billion plays recorded in the same period of 2024. New drama releases totaled 94 titles, a reduction of 32 compared to the previous year. The three-year trend from 2024H1 to 2026H1 shows plays declining from 62.3 billion to 55.7 billion to 43.9 billion respectively, signalling a persistent industry-wide contraction.
Against this backdrop, the performance of the eight listed companies has diverged sharply. Huace Film & TV reported first-half revenue of RMB 685 million, down 13.22% year-on-year, but net profit attributable to shareholders reached RMB 167 million, a 41.98% increase, making it the most profitable among the eight. The core growth driver was not its primary drama business, but its computing power segment, which generated RMB 160 million in revenue, surging 184.03% year-on-year. This segment's revenue share rose to 23.41%, with a gross margin of 42.79%. While the revenue recognition cycle for its traditional TV drama production and distribution business extended the pressure on overall revenue, the computing power segment effectively offset the volatility of its core operations.
Lemon Studios also delivered a strong performance, posting first-half revenue of RMB 541 million, up 34.8% year-on-year, and net profit attributable to shareholders of RMB 29.28 million, a 170.57% increase. The growth was driven by the steady delivery of premium dramas and rapid expansion of its short-drama segment, which generated approximately RMB 58 million in revenue during the period, up nearly 10% year-on-year.
Bainaqiancheng reported first-half revenue of RMB 564 million, a staggering 313.57% year-on-year surge, already surpassing its full-year 2025 revenue. Although it recorded a net loss attributable to shareholders of RMB 2.95 million, this represented a significant 84.99% narrowing of losses. The revenue surge was primarily attributed to the concentrated recognition of previously stockpiled dramas. The company has shifted its strategic focus from clearing legacy risks to confirming content supply and executing new business initiatives.
However, most other companies continue to struggle. H&R Century Union Corporation achieved revenue of RMB 248 million, up 25.24% year-on-year, but its net loss attributable to shareholders widened dramatically to RMB 144 million, a 2,147.62% increase from the RMB 6.39 million loss recorded in the corresponding period last year. In terms of business structure, its traditional film and TV drama business saw gross margin deteriorate to -19.67%, a decline of 97.82 percentage points. Its artist management business experienced a 17.78% revenue decline and a 29.14 percentage point drop in gross margin.
Strawbear Entertainment saw revenue fall 59.4% to RMB 181 million. Gross profit plunged 99.9% to a mere RMB 80,000 from tens of millions a year earlier, resulting in a net loss of RMB 52.66 million, eight times larger than the prior year's loss. Dasheng Times Cultural Investment Co., Ltd. reported revenue of RMB 154 million, up 41.47% year-on-year, but its net loss attributable to shareholders widened 15.19% to RMB 38.85 million. The company's net assets have fallen to negative RMB 20.91 million, with an asset-liability ratio of 104.24%, placing it in a state of technical insolvency.
Huazhi Shumei generated revenue of just RMB 53.98 million. While it reported a profit of RMB 42.6 million attributable to shareholders, marking a turnaround, this was primarily due to the reversal of credit impairment provisions rather than operational improvements. Excluding this factor, net profit would have shrunk dramatically to RMB 5.37 million. Cime Media saw revenue plunge 90.02% to just RMB 18.92 million in the first half, with a net loss of RMB 33.23 million attributable to shareholders, widening 43.98% year-on-year. Its non-GAAP net loss reached RMB 37.1 million. If full-year revenue falls below RMB 300 million, the company faces the risk of being designated with a *ST (special treatment) status.
Across these eight companies, the core contradiction in first-half performance lies in the dual squeeze from extended revenue recognition cycles in the long-form drama business and tightened platform procurement budgets. The pace at which second growth curves can be cultivated will determine the direction of future divergence.
Seeking New Growth Avenues: From Computing Power to Short Dramas
The persistent contraction of the long-form drama market has compelled drama companies to accelerate exploration of new business tracks. In the first half of the year, the eight companies pursued diverse diversification strategies, yet shared a common direction: either entering hard-tech infrastructure like computing power or deepening their focus on lightweight content formats such as micro-dramas.
Computing power has emerged as the biggest performance highlight for Huace Film & TV. The company's computing power operations have entered a phase of scaled development, forming a dual-engine model combining "trading and cloud services". During the reporting period, this segment generated RMB 160 million in revenue, up 184.03% year-on-year, accounting for 23.41% of total revenue—a significant increase. Its gross margin reached 42.79%, up 14.21 percentage points year-on-year.
Micro-dramas have become a common choice for many companies. Lemon Studios' short-drama segment generated approximately RMB 58 million in revenue, up nearly 10% year-on-year. H&R Century Union Corporation has established a short-drama operation system covering platforms such as WeChat, Douyin, Kuaishou, Hongguo, and Pinduoduo, exploring commercialization through paid short dramas, free short dramas, and platform collaborations. Huazhi Shumei is driving the premium upgrade of short dramas, pursuing a differentiated path characterized by high-quality, niche productions. Its jointly produced premium short drama "Boss, I'm Here" on the Hongguo platform launched in January 2026.
It is worth noting that the micro-drama sector itself is undergoing intense consolidation. In the first half of 2026, over 220,000 new AI-generated short dramas launched nationwide, yet only 1,055 achieved over 100 million plays, representing a hit rate of less than 0.5%. AI has lowered production barriers, but it has not lowered the barrier to being seen. When anyone can produce content at minimal cost, attention itself becomes the scarcest resource, driving up acquisition costs and further compressing profit margins.
DataEye-ADX monitoring indicates that 98.7% of AI micro-dramas fail to recoup their investment within six months of launch, with only 1.3% of projects achieving profitability. This suggests that while micro-dramas represent a traffic hotspot, commercialization is far more challenging than the industry anticipated, and most drama companies have yet to find a sustainable profit model in this arena.
"Premiumization" is becoming industry consensus. Ocean Engine has explicitly stated that short-drama teams must build three core competencies: premium content and IP development, integrated omni-channel operations, and long-term asset accumulation. Kuaishou has invested RMB 200 million in cash to incubate premium drama series. China Literature is leveraging DramaBuddy to construct an industrialized pipeline from IP to animated dramas. However, premiumization also entails higher production investments and longer development cycles—inherently conflicting with AI short dramas' initial logic of "low cost, fast turnaround". Striking a balance between scale and quality remains an unresolved industry challenge.
AI Technology Advances from Industrial Delivery to Platform Construction
AI's penetration into the drama industry accelerated significantly in the first half of 2026. Chen Fei, co-founder of Lemon Studios, predicts that after AI entered creative writing in 2023, multimodal breakthroughs brought AI into video production in 2024, and intelligent agents integrated AI into production workflows in 2025, "2026 will see AI achieve industrialized delivery".
The AI deployment progress among the eight listed companies reveals clear tiering. The first tier consists of Huace Film & TV and Huazhi Shumei, which have established end-to-end production capabilities for AI dramas and AI animated dramas, with some segments already generating independent revenue, thereby realizing commercial returns on technology investments.
Huace Film & TV has established an AIGC Application Research Institute and related content teams, launching several AI-empowered projects. These include transforming the national IP "Journey to the West" into a premium AIGC medium-length drama—six episodes of 15 minutes each, focusing on Sun Wukong's 500 years beneath the Five Elements Mountain. The company has also released a micro-drama adaptation of "Zizhi Tongjian", positioned as China's first historical drama with full-process AI participation. Additionally, its AI felt-animated drama "Taiping Nian Xiao Juchang" is now airing, and a trailer for its original AI live-action drama "Fei Se Zhi Qi" has been released.
Huazhi Shumei, in collaboration with Xuanye Technology, has launched the industry's first vertical AI face-swapping large model, focusing on applications such as face replacement in film and TV dramas and high-consistency video generation. The company is deeply involved in developing the "Zhi Mei Guo" AIGC technology platform for Zhejiang Radio & TV Group, has used the platform to create multiple short dramas and short videos, and has applied large models like DeepSeek to assist in creative generation and scriptwriting for medium and short dramas. It is actively expanding its footprint in AI animated dramas and AI live-action dramas.
The second tier includes Bainaqiancheng, H&R Century Union Corporation, and Lemon Studios, which are in early-stage exploration and commercialization phases. Here, AI primarily serves to reduce costs, improve efficiency, and open new content formats, but stable, scaled revenue has not yet materialized.
In May 2026, Bainaqiancheng's holding company, Zhongwen Sihai Culture Media (Haining) Co., Ltd., was established with self-developed AI technology as its foundation, focusing on full-chain IP development and AI content production. Its key areas include original IP development, short-drama scripts, commercial AI animated dramas, premium short dramas, AI-driven cultural tourism custom dramas, and AI promotional videos. While this move represents a step toward organizing Bainaqiancheng's AI strategy, it remains far from achieving substantive business implementation.
H&R Century Union Corporation has partnered with technology firms including StepFun, Sansheng Qingying, and Minglue Technology to integrate AI into its full content production workflow. Specifically, the company has released an AI short-drama concept trailer based on its IP series "Ten State Three Realms". However, the company has explicitly cautioned that its AI short-drama business has yet to achieve scale in terms of release volume, revenue size, or cost-effectiveness, with AI short-drama revenue accounting for less than 1% of total revenue in the first half of 2026.
Lemon Studios' AI x live-action advertising short drama "The Stars From Us" has garnered over 1.88 billion total exposures and surpassed 100 million plays. The company has also established a dedicated AI team for its overseas business, focusing on AI dubbing for Chinese dramas distributed abroad, support services for its overseas proprietary channels, and production of overseas AI live-action dramas. AI-assisted efficiency improvements exceeding 50% have been realized in overseas micro-dramas, YouTube proprietary channel operations, and overseas promotional commerce. Overall, while Lemon Studios' AI deployment is focused on differentiated overseas tracks with quantifiable results, its AI content remains predominantly supplementary services and pilot projects, not yet constituting an independent revenue segment.
The third tier comprises Cime Media, Strawbear Entertainment, and Dasheng Times Cultural Investment Co., Ltd., which remain in early infrastructure building or wait-and-see modes. Cime Media stated in its semi-annual report that it is "closely monitoring the strategic opportunity of AI technology to deeply restructure the film and TV industry and has initiated AIGC platform construction and operation", but simultaneously cautioned that "as of the report date, the company's AIGC platform is still under construction and has not generated any related revenue". Previously, the company disclosed in investor interactions that it has only made sporadic use of third-party AI tools in its film and TV project production processes, without significant impact on daily operations.
Strawbear Entertainment, facing a significant decline in first-half performance, has not demonstrated clear AI initiatives. Dasheng Times Cultural Investment Co., Ltd., operating as a dual "film and TV + gaming" company, exhibits distinct AI application disparities across segments. On the gaming side, the company has long experimented with AI-assisted art generation and NPC interaction for cost reduction and efficiency gains. However, AI involvement in its core film and TV production and distribution business remains minimal. The company disclosed no specific AI drama projects in its semi-annual report, indicating a wait-and-see approach with limited pilot testing.
The commercialization prospects for AI dramas remain highly uncertain. While AI technology can substantially compress production costs, content quality and audience acceptance remain core bottlenecks. The staggeringly high 98.7% loss rate among AI micro-dramas demonstrates that technological cost reduction does not automatically translate into commercial success. For drama companies, AI's true value may lie not in replacing traditional production processes, but in redefining the efficiency boundaries of IP development and content operations.
The first-half industry landscape is both clear and unforgiving: the structural contraction of the long-form drama market appears irreversible, micro-dramas' rapid growth is accompanied by high elimination rates, and AI's cost-reduction benefits remain unproven. The performance divergence among the eight listed companies has already demonstrated that business models relying solely on long-form drama production are no longer viable. The pace at which second growth curves are cultivated and the depth of AI technology implementation will ultimately dictate the trajectory of competitive dynamics in the next phase.