China's short dramas have surpassed the film market in scale this year! Goldman Sachs: Expects a compound annual growth rate of 25% over the next two years

As various short dramas sweep across video platforms, Goldman Sachs has released an in-depth report enthusiastically bullish on the prospects of the domestic short drama/mini-drama market.

Analysts indicate that the total addressable market (TAM) for domestic short dramas/mini-dramas has surpassed that of the film market, approaching 70% of the long video streaming market. The overall market size is expected to continue growing over the next 2-3 years, potentially reaching 91 billion yuan by 2027.

Goldman Sachs emphasizes that, due to the model's heavy reliance on user acquisition, advertising platforms like KUAISHOU and Tencent are the biggest beneficiaries of this wave of short video popularity. In the long run, the boundaries between short and long dramas will gradually blur. Long video platforms, which are currently under significant pressure, must learn to adapt.

A Highly Disruptive Form of Entertainment

Goldman Sachs analyst Lincoln Kong stated in a report on December 18 that since last year, short dramas and mini-dramas have emerged as a highly disruptive form of entertainment in China and are becoming increasingly popular.

Goldman Sachs estimates that the total addressable market (TAM) for short dramas/mini-dramas has now exceeded that of the Chinese film market (with an annualized TAM of 50 billion yuan, while the film market size is approximately 47 billion yuan), accounting for about 70% of the long video streaming market size. By 2024, the daily active users (DAU) of short dramas/mini-dramas will exceed 400 million, with an average daily usage time of over 30 minutes, and total usage time this year has already surpassed that of long video streaming.

Goldman Sachs believes that, based on the continued increase in user penetration and usage time, the TAM for the short drama market will achieve a compound annual growth rate of 25% over the next two years, with the market size expected to reach 91 billion yuan by 2027.

Model Heavily Relies on User Acquisition

In terms of the short drama value chain, short dramas/mini-dramas typically have a duration of 2-3 minutes per episode and generate revenue through in-app purchases (IAP) and in-app advertising (IAA).

Their plot settings are carefully designed to stimulate continuous viewing; if users want to watch parts of the episode that suddenly stop, it will lead to impulsive payments. Most viewership is concentrated on short video platforms / mini-programs or other standalone applications.

Goldman Sachs emphasizes that due to this model's heavy reliance on user acquisition, nearly 80% of the total addressable market size (TAM) is spent on marketing and user acquisition on major traffic platforms, including Douyin and KUAISHOU, leaving a profit margin of about 5%-10% for short drama producers.

Goldman Sachs believes that, given their engaging content and the trend of potentially shortening user attention spans, short dramas and mini-dramas are a highly disruptive form that will continue to capture user usage time share over the next 2-3 years. As short dramas dominate, the free-to-play/in-app advertising (IAA) model may rapidly rise, as users become increasingly accustomed to free models.

There is significant growth potential in overseas markets (currently with a total addressable market size of $1 billion), and given the stronger willingness of global audiences to pay, more Chinese producers are now targeting overseas markets through in-app purchases (IAP) and subscription models

Long Video Platforms Must Learn to Adapt

Goldman Sachs believes that against the backdrop of the rise of new models, short video platforms such as Douyin, KUAISHOU, and Tencent Video Accounts will continue to benefit from the growing total addressable market (TAM) and advertising expenditure in the short drama market. Short dramas/mini-dramas are becoming an important growth vertical (currently accounting for 10% of KUAISHOU's external advertising), and with the rapid rise of in-app advertising (IAA) models, advertising expenditure is expected to continue to grow at over 30% by 2025.

According to Goldman Sachs' estimates, the revenue generated per minute from short dramas may be slightly lower than the overall level of short video platforms (SFV), indicating lower monetization efficiency, but it will increase the overall usage duration and user stickiness of short video platforms.

Goldman Sachs believes that long video platforms such as iQIYI and Mango are currently under pressure from the impact of short dramas, and it is expected that most platforms will have to accept this format, either by producing short dramas themselves or by providing third-party short dramas as part of membership benefits within their applications. In the long run, the boundary between short dramas and long dramas is gradually blurring.