The global landscape for short drama content is rapidly evolving, particularly as we move into 2024. Emerging from China, the short drama industry has begun a tidal wave of international expansion, with significant strides in content creation and market penetration.

Reports indicate that over 40 short drama apps from Chinese companies have already been launched overseas, cumulating in a user base exceeding ten million for some applications. Estimates from leading short drama platforms suggest that total revenue from these international offerings reached an impressive $2.3 billion by mid-2024, with projections for the year's end nudging towards $4 billion.

Such growth speaks not only to the swift adoption of this content format but also to the potential user base waiting to be tapped. TikTok for Business has estimated that short drama apps attract a monthly user base between 20 to 40 million, with expectations of climbing as high as 200 to 300 million in the coming years.

From a strategic market perspective, the global ascent of short dramas manifests itself across various regions. Notably, the U.S. stands as the largest contributor to international revenue from Chinese short dramas, accounting for over 50% of the total. With a strong culture of paid content, the European market is ripe for exploration, with countries like Germany and France ranking high in revenue contributions. Meanwhile, Southeast Asia is emerging as a core market for downloads, buoyed by cultural ties to China, as well as Japan and South Korea seeing a notable increase in engagement for these offerings. The Middle East also represents a burgeoning frontier for short dramas, characterized as the next wave in the global media landscape.

The Chinese short drama industry is evolving in terms of scale, speed of international expansion, and localization capabilities, illuminating a path for deeper analysis and understanding.

On December 5th, at the WAVE2024 Global Leaders Conference, a panel discussion featured industry experts including ShortMax co-founder He Zexi, LuckyShort CEO Deng Xianyao, HRH TV partner Liu Jianhua, and Seven Cats Cultural CFO Wang Kui, focusing on the topic, "Short Dramas Going Global: How to Navigate Challenging Waters?".

Many now regard short dramas, alongside web narratives and gaming, as part of the "New Three Distinctive Elements" of Chinese cultural exports.

Reflecting on the competition and shaking of the market over the past year, some wonder if the short drama internationalization sector still represents a blue ocean opportunity.

Wang Kui of Seven Cats Cultural asserts that while short dramas face a competitive landscape, there remains vast uncertainty around final business models. When comparing the short drama market to China's online literature industry, he notes that the "free + ad monetization" model can thrive based on the immense user base domestically. The Chinese Writers Association reports that by the end of 2023, there were 520 million users of online literature in China, providing a solid foundation for a model reliant on free access. By contrast, finding an equivalent overseas audience presents a significant challenge, limiting similar monetization strategies.

Despite these hurdles, Wang continues to express optimism for the future of short dramas as an expansive market. The key competitive advantage, he argues, lies in effectively transferring surplus production capacity from China to international markets, enabling innovative solutions that address content operations, R&D capabilities, localization tactics, and market entry strategies. Such an approach requires a comprehensive execution system that goes beyond mere content export, thus enhancing competitive dynamics.

Deng Xianyao, the CEO of LuckyShort, brings his extensive venture capital experience into focus on the burgeoning short drama market. He notes the surge in user downloads and revenue growth over the past year. He predicts that by early next year, daily ad expenditures across third-party platforms for these apps might exceed $10 million.

Through his lens as an investor, Deng identifies Southeast Asia, Europe, and the Middle East as diverse markets, each presenting unique production methods, trending subjects, and differentiation in cost and profitability. The U.S. leads downloads, representing a market share of 26.8% and a stunning 63.8% of net revenue. Notably, North America commands an average revenue per download of approximately $4.70, while Europe follows closely with $2.30.

Deng further notes that even in emerging markets with limited consumer spending power, a "paywall" model remains viable, while in more established T1 markets like the U.S., the "free + ad monetization" remains effective. He suggests teams assess their strengths in resource management and strategy, determining how best to integrate into various regional markets.

According to estimates, the total annual market size for short dramas internationally stands at approximately $36 billion, indicating a significant growth potential given that Chinese companies operating in this space are not yet scratching the surface of the market.

For Liu Jianhua, a partner at HRH TV, the rise of shared media content like short dramas is an answer to the entertainment void in emerging markets that are equipped with sophisticated digital infrastructure yet lack sufficient entertainment options. Taking Saudi Arabia as a case study, Liu points out that the Vision 2030 plan is revitalizing the nation, marking a historical pivot towards increased local entertainment options, exemplified by the country's first commercial cinema debuting with a Marvel blockbuster.

Despite a stark contrast in local entertainment resources, the willingness to pay among Saudi consumers is noteworthy. Reports indicate that among the country's 35.95 million population, around 24.2 million gamers display an intent to spend, with mobile gaming's average revenue per user reaching a global high of $270.

Thus, Liu emphasizes the need for localized, culturally relevant content. However, the region's cultural nuances and narrative constraints pose challenges. Despite this, he remains bullish on the short drama market, suggesting that the volume of overseas opportunities could ultimately surpass domestic markets.

Efforts by companies like ShortMax to validate the overseas potential of this genre are indeed crucial. He Zexi notes that the significant growth in platform users and the prevailing acceptance of short video formats indicates a genuine market interest. The current short drama penetration rate domestically is around 60%, while globally it sits between 5% and 10%, hinting at substantial growth opportunities ahead.

However, he cautions that the operational hurdles of scaling overseas can be onerous. Building a platform for domestic export or creating a TikTok-like experience with story-based endeavors demands systemic capabilities. These projects necessitate thoughtful resource allocation and creative inputs to ensure competitive advantages.

Among the successes is the short drama ReelsShort, launched by Crazy Maple Studio, which had two productions that became overnight hits. By the summer of 2023, it had garnered positive traction, achieved over 1.9 million downloads across major app stores, and reached monthly revenue of $6 million.

This momentum has established ReelsShort as a leading player in the North American market, contributing to 52% of the downloads and 48% of revenues for the short drama segment. In November, it seized the number two spot on the U.S. App Store's entertainment category.

This explosion of popularity underscores the importance of hit series for short drama platforms. As the landscape competes intensively, the question arises: how to reproduce that success?

Deng Xianyao believes that for platforms relying on the "free + ad monetization," individual hit series must play a role, but sustaining content and user retention take precedence. Metrics like click-through rates, cost per install, and engagement benchmarks take precedence in assessing success. LuckyShort's approach includes various genres to engage female audiences, ensuring their return and continued connection with the platform.

Notably, unlike domestic markets favoring male-centric narratives, overseas platforms still lean heavily towards female-oriented content. The increasingly diversified audience means that as the user base expands, quality storytelling will occur across more genre niches, including BL dramas targeted at Southeast Asian audiences.

Identifying a formula for creating hits is complex. Liu Jianhua stresses the creation process, which includes having the right script, a talented production crew, and effective post-production to ensure delivery aligns with audience expectations. The script remains the linchpin of any successful production, determining its potential market impact.

Breaking down the production intricacies, he asserts that successful short dramas must appeal to a broad audience. If targeting niche segments, the chances of becoming a blockbuster diminish. Release strategies must differ for short dramas, which often rely on advertisement-driven discovery.

As the industry evolves, the impact of AIGC on the production workflow is increasingly evident. From transcription to voice production and video generation, artificial intelligence provides significant enhancements in efficiency and localization capabilities. The advancements foreshadow a shift in how narratives are created, potentially leading to entirely new story creation modalities where AI can replace traditional functions.

Thus, Deng Xianyao anticipates embracing AI-powered tools to elevate the personalization and accessibility of these dramas in global markets. Meanwhile, He Zexi remains cognizant that while current AI efficiencies can streamline processes, transformative impact remains on the horizon. The industry's focus may shift dramatically towards user-generated content formats in the forthcoming years, building distinct pathways for content creation.

In conclusion, the international short drama sector, buoyed by technological advancements, innovative storytelling, and market demand, has the potential to define a new era in global content. Chinese short dramas stand poised to continue their rise, crafting narratives that resonate and create audience engagement around the world.