I. The Overnight Explosion of Short Dramas

“Yesterday you couldn’t be bothered with me; today I’m beyond your reach.” The stunning transformation of short dramas—especially mini-program short dramas—has caught everyone off guard. Just over two years ago, if you asked anyone in the film industry, no one would have believed that the crude, vulgar short drama would by this year have become a 200-billion-yuan business. What does 200 billion mean? The Chinese film market, which has been developing for decades, had a total box office of 301 billion yuan in 2022. In other words, the size of the short drama market now equals about 66% of last year’s film market.

Looking back at the record-breaking events in the mini-program short drama market over the past two years, they still seem unbelievable: “Wushuang” (Peerless), with a production cost of less than 500,000 yuan, allegedly saw充值 (top-up revenue) exceed 100 million yuan within eight days of launch; “After the Flash Marriage, Mr. Fu’s Vest Can’t Be Hidden” had a 24-hour充值 revenue of over 20 million yuan. Such wealth-creating myths abounded. For a time, social media was flooded with photos of the celebration cakes for mini-program short dramas, all in bright red and gold. The explosive popularity of short dramas ignited the enthusiasm of investors across various fields. In 2023, mobile short dramas were undoubtedly the hottest investment darling, with hundreds of film crews squeezing into one shooting base to compete for locations. Directors who hadn’t landed a single gig in three years now had their schedules booked up to a year and a half in advance.

Hengdian, a major Chinese film and television shooting base, might now need to be renamed “Vertical-dian”: because modern people are accustomed to watching on vertical phone screens, short dramas have adapted to this evolutionary habit by adopting vertical shooting. This directly results in the camera being turned sideways during filming, and the monitors that were once placed horizontally in front of the director are now vertical. People just transferred from formal film crews are initially not used to this change. But for the sake of “whether I can achieve financial freedom depends on this wave,” what habit can’t be changed!

Capital is sharpening its knives. On one side, long video platforms like iQiyi, Youku, and Tencent Video have launched their own short drama brands. “The first stock of live-streaming e-commerce,” Yaowang Technology, has issued a script solicitation order, with its self-produced short dramas expected to go online in December this year. State-owned enterprise Zhongguang Dianli is aggressively promoting the “Hippo Theater.” On the other side, short-video giant ByteDance has personally entered the fray with “Tomato Short Dramas.” Major film and television companies, MCN institutions, live-streaming platforms, and short-video platforms are all jumping in, determined to get a piece of the pie. Even Baidu and Xiaomi are considering linking their own novel platforms to layout in the short drama track.

How do short dramas make money? This comes down to their underlying revenue logic: low-cost investment → rapid production → traffic acquisition and promotion → audience attraction → user payment. The production cost of a short drama generally does not exceed 1 million yuan, and some shoddy productions even cost less than 500,000 yuan. After the director forms a crew, all episodes can be shot in about a week, and then about another week is spent editing everything into a finished film. The short drama can then be launched. Traffic acquisition is the most capital-intensive step. Whether to continue investing depends mainly on the return on investment (ROI). When a short drama’s ROI is ≥ 1.2, profitability is achieved. Once launched, users click on information flow ads on platforms like WeChat, Weibo, Douyin, or Kuaishou, and are redirected to a mini-program (e.g., on WeChat or Douyin) to watch episodes. The first ten or so episodes are free, and subsequent episodes cost between 1 and 3 yuan each. Unlike the buyout/revenue-sharing model of long videos or the advertising model of short videos, the current mainstream profit model relies on users paying to top up (充值).

The operation process of a short drama is very fast, and the elimination rate is brutal. According to the industry’s “golden three hours” theory, early traffic investment must be large, fast, and aggressive. Whether it becomes a hit depends on the充值 situation in the first few hours. Once the company judges that the ROI is good, it will immediately reinvest the early充值 revenue into more traffic acquisition. If the ROI is poor, they cut losses in time. The micro-drama industry often says, “Earn ten, invest nine.” The gross margin for top players is even less than 10%. That is to say, behind 10 million yuan in充值, the traffic acquisition cost may be over 9 million yuan. Xi’an Fenghang, the production company behind “Wushuang,” once responded that “breaking 100 million” actually referred to traffic advertising consumption breaking 100 million. Using an optimistic ROI standard of 1.2, the actual profit might be around 20 million yuan.

II. The Chaos Behind the Capital Feast

As more and more capital enters, the short drama market has become overrun with crude opportunists. Everyone wants to make a quick and big fortune by riding the wind, and no one cares about content quality. Some short dramas are even completed in as fast as three days, costing as little as tens of thousands of yuan, with most funds used for traffic acquisition. Today, the problems with short dramas are not limited to content homogenization and shoddy production; many resort to borderline content for traffic, and there have even been vulgar plots like “a eunuch bathing the empress.” Unlike long-form dramas, which undergo strict review, many micro-dramas initially lacked filing and registration, and because their distribution channels were relatively hidden, they easily evaded regulation. This allowed many small crews and small film companies to act recklessly, giving micro-dramas a reputation for “borderline, incest, melodrama, and vulgarity.” Some even used short dramas as a pretext to deceive vulnerable groups like the elderly and children, inducing them to pay.

In April 2023, WeChat, Douyin, and Kuaishou launched a series of crackdown operations, collectively removing over 2,400 micro-drama mini-programs from their shelves. Now, the National Radio and Television Administration (NRTA) has gradually pushed forward special governance efforts for mini-program short dramas. The three major platforms, cooperating with the authorities, have launched heavy strikes, each time more severe than the last. Douyin has cumulatively removed 119 illegal micro-dramas and dealt with 1,188 illegal accounts. As regulation tightens, the days of short dramas “running naked” (unlicensed and unregulated) and racing wildly may never return, and the entire market will gradually cool down. But as long as the profit window has not completely closed—even if only one second remains—there will be people who rush in recklessly. To this day, people are still eager to try, thinking, “Take a gamble, turn a bicycle into a motorcycle,” “Whether I can achieve financial freedom depends on this wave.”

III. Short Dramas Must Hold Licenses to Operate Legally

With tightening regulation, capital’s “wild-racing train” must consider the issue of “legal operation” on the crowded short drama track. Short dramas that “run naked” must “hold a license to work.” In other words, investors should pay increasing attention to the compliance issues of short dramas to avoid crossing red lines; otherwise, their early investments will turn into nothing.

(A) Regulatory Provisions Before June 1, 2023

1. Key Online Film and TV Series Information Filing System

In August 2020, the NRTA added a “Network Micro-Drama” fast registration and filing module to the “Key Online Film and TV Series Information Filing System.” This was the fourth filing category added after online films, online series, and online animations. In December 2020, pursuant to the “Notice of the General Office of the National Radio and Television Administration on Issues Concerning the Content Review of Micro-Dramas in Online Film and TV Series” (GBF No. [2020] 293) (hereinafter “Notice 293”), “key online micro-dramas” must be filed by radio and television program production entities in the “Key Online Film and TV Series Information Filing System,” including pre-production planning filings and post-production online filings, obtaining a planning filing number and an online filing number respectively. “Ordinary online micro-dramas” must undergo self-review by the video broadcasting platform, which then aggregates the review information monthly and files it in the “Online Audio-Visual Program Information Filing System.”

2. Network Drama/Film Distribution License

In December 2022, the NRTA issued the “Notice on Further Strengthening the Management of Online Micro-Dramas and Implementing the Creation Improvement Plan” (GBF No. [2022] 345) (hereinafter “Notice 345”). It stated: All micro-dramas must pass content review by the radio and television administrative departments and obtain a “Network Drama/Film Distribution License,” or complete the online audio-visual program filing in accordance with the relevant regulations for the management of online drama/films.

According to the “Notice of the General Office of the National Radio and Television Administration on Matters Concerning the Administration of Distribution Licenses for Domestic Online Drama/Films” (GBF [2022] No. 128), which took effect on June 1, 2022, online dramas, online micro-dramas, online films, and online animations that meet one or more of the following conditions are defined as “key online drama/films” and must obtain a “Network Drama/Film Distribution License” issued by the radio and television authorities:

a. Those with a relatively large investment amount; the specific amount is determined by the State Council’s radio and television authority based on the development and management practice of the online audio-visual industry, and adjusted and announced in a timely manner. Generally, online dramas and online animations with a total investment exceeding 5 million yuan, and online films and online micro-dramas with a total investment exceeding 1 million yuan, are considered key online drama/films; b. Those that are promoted as a priority by online audio-visual program service organizations; c. Those recommended for broadcast on the homepage/first screen, special sections, or dedicated columns of websites (clients); d. Those that prioritize providing member viewing or provide viewing services on a paid basis; e. Those voluntarily declared as key online drama/films by the production/distribution entity.

Therefore, key online micro-dramas must obtain a “Network Drama/Film Distribution License” before they can be broadcast online. Ordinary online micro-dramas are still reviewed by the video broadcasting platform and then filed in the “Online Audio-Visual Program Information Filing System.”

(B) Regulatory Provisions After June 1, 2023

According to the “Online Drama/Film Distribution License and Broadcasting Management Tips” issued by the Network Audio-Visual Program Management Department of the NRTA on May 30, 2023, for online micro-dramas newly passed through planning filing after June 1, 2023, a full license coverage management approach is adopted. They must obtain a “Network Drama/Film Distribution License” before they can be broadcast; those without a license shall not be broadcast. From June 1, 2023, newly launched online micro-dramas must be works that have been submitted through the “Key Online Film and TV Series Information Filing System,” and after passing content review by provincial-level or above radio and television administrative departments, have obtained a “Network Drama/Film Distribution License” or an online filing number.

Furthermore, the function in the “Online Audio-Visual Program Information Management System” for online micro-dramas to be self-reviewed and then registered and filed by online audio-visual program service organizations has ceased. This change means that the previous channel where video broadcasting platforms first self-reviewed content and then filed aggregated review information monthly no longer exists. At the same time, for online micro-dramas that only have an online filing number, as of June 1, 2023, they may only be registered and broadcast by one online audio-visual broadcasting platform; they may not be distributed to other platforms, may not be recommended for broadcast on the homepage or first screen, and may not receive member recommendations or program excellence recommendations. Before all online micro-dramas go online and are broadcast, they must fulfill the online audio-visual program broadcast plan reporting procedure.

According to industry insiders who have verified with relevant authorities on the front line, in practice, there is no longer a distinction between key online micro-dramas and ordinary online micro-dramas. All micro-dramas that go online and are broadcast must be filed. Filings completed before the 10th of each month will be reviewed by the provincial radio and television administration department before the 5th of the following month and reported to the NRTA, which will then issue the final result before the 5th of the following month. In practice, the authorities have begun to impose requirements on the production quality of online micro-dramas, and those with crude production may be advised to withdraw.

(C) Required Licenses and Permits for Engaging in Online Micro-Drama Business

The online micro-drama market currently exhibits a clear head effect. Douyin, Kuaishou, iQiyi, Youku, China Literature, and Chinese Online have been laying out their plans for years, but the tempting economic benefits cannot stop various enterprises from jumping in to share the pie. According to effective laws and regulations, engaging in the production, distribution, and platform business of online micro-dramas involves the following major licenses and permits:

1. Value-Added Telecommunications Business Operating License (ICP License)

According to the “Administrative Measures for Internet Information Services” (revised in 2011), entities engaged in commercial Internet information services must apply to the provincial, autonomous region, or municipality directly under the central government telecommunications regulatory authority or the State Council’s information industry authority for an Internet Information Service Value-Added Telecommunications Business Operating License. Engaging in the production and distribution of online micro-dramas constitutes commercial Internet information services and requires an ICP license.

2. Internet Cultural Business Permit (Wen-Wang-Wen Permit)

According to the “Interim Provisions on the Administration of Internet Culture” (revised in 2017), entities engaged in commercial Internet cultural activities must apply for and obtain an Internet Cultural Business Permit. The production, reproduction, import, distribution, and broadcasting of Internet cultural products all fall within the scope of Internet cultural activities. Activities that generate revenue by charging online users or through e-commerce, advertising, sponsorship, etc., and providing Internet products and services are considered commercial Internet cultural activities. Engaging in online micro-drama business with commercialization attributes requires a Wen-Wang-Wen permit.

3. Radio and Television Program Production and Operation Permit

According to the “Provisions on the Administration of Radio and Television Program Production and Operation” (revised in 2015), entities engaged in radio and television program production and operation must obtain a Radio and Television Program Production and Operation Permit. According to the operational guidelines for the Key Online Film and TV Series Information Filing System, entities that have obtained a Radio and Television Program Production and Operation Permit and engage in key online film and TV series production may apply to the provincial radio and television administrative department for a user name and password for the aforementioned system. Therefore, holding a Radio and Television Program Production and Operation Permit is essential for engaging in online micro-drama production.

4. License for the Dissemination of Audio-Visual Programs via Information Networks (Audio-Visual Permit)

According to the “Provisions on the Administration of Internet Audio-Visual Program Services” (revised in 2015), enterprises providing Internet audio-visual program services must legally obtain a License for the Dissemination of Audio-Visual Programs via Information Networks or fulfill the filing procedures (filing procedures apply to radio stations, television stations, central news units, etc.). Internet audio-visual program services include, but are not limited to, producing, editing, integrating, and providing audio-visual programs to the public via the Internet, as well as providing services for others to upload and disseminate audio-visual programs.

IV. Risks and Prevention for Short Drama Producers

(A) Legal Risks and Prevention for Short Drama Producers

1. Risks and Prevention of Administrative Penalties, Industry Self-Regulation, and Platform Supervision

(1) Risks

On November 2, 2020, the General Office of the NRTA issued the “Notice on Issues Concerning Content Review of Micro-Dramas in Online Film and TV Series,” adding the category “Network Micro-Dramas” for the first time in the key online film and TV series filing system, promoting the gradual standardization of micro-dramas.

On December 15, 2021, the China Netcasting Services Association (CNSA) released the “Detailed Standards for the Review of Online Short Video Content (2021)” as an industry standard, specifying detailed standards for online short video review and listing 21 types of prohibited content, covering 100 specific content items, such as content promoting bad, negative, and decadent outlooks on life, world, and values; content promoting values such as traffic-first, extravagant enjoyment, showing off wealth and money worship, and displaying degenerate lifestyles that violate ethics; and content showing “fan circle” chaos and bad fan culture, advocating and hyping traffic supremacy, distorted aesthetics,狂热追星, irrational fan voices and support, and celebrity scandals and gossip.

On November 14, 2022, the General Office of the NRTA issued the “Notice on Further Strengthening the Management of Online Micro-Dramas and Implementing the Creation Improvement Plan,” which explicitly proposed a special rectification of “mini-program” online micro-dramas featuring pornographic and vulgar, bloody and violent, low-toned, and aesthetically ugly content. Violating micro-dramas should be ordered to rectify and forcibly taken offline; the “mini-programs” disseminating illegal online micro-dramas and their founding entities shall, depending on the severity of the circumstances, be subject to measures such as link removal, offline removal, shelf removal, cancellation of filing, cessation of access services, revocation of relevant permits, and joint disciplinary actions.

On November 15, 2023, the CNSA stated that the NRTA will continuously improve the normalized management mechanism for short dramas, strengthening management from seven aspects, including accelerating the formulation of the “Detailed Rules for the Creation, Production, and Content Review of Online Micro-Dramas” and establishing a mini-program “blacklist” mechanism.

The above administrative regulations and industry self-regulatory provisions demonstrate China’s determination to rectify the chaos in the short drama industry, strictly reviewing content with bad orientations such as pornography, vulgarity, blood and violence, low taste, and ugly aesthetics. Therefore, if a short drama producer violates administrative regulations and industry self-regulatory rules, it will not only face the risk of administrative penalties but may also face criminal sanctions. Currently, depending on the severity of the circumstances, the relevant provisions may impose platform penalties and administrative penalties on violating short dramas, including link removal, offline removal, shelf removal, cancellation of filings, cessation of access services, revocation of relevant permits, and joint disciplinary actions.

(2) Risk Prevention

As regulatory trends tighten, in fact, some short dramas have already faced severe measures from the authorities or platforms due to their themes and content not meeting the requirements of relevant normative documents. For example, recently, the micro-drama “The Black Lotus Ascension Guide” promoted bad values of extreme revenge and violence to counter violence, confusing right and wrong, and undermining the platform’s good ecosystem; relevant platforms have removed this drama. Another example is the micro-drama “Virtual Beauty,” which was ordered to be taken down and rectified due to its content exceeding scale; it was allowed to be re-listed only after deleting explicit borderline content.

Therefore, short drama producers should actively study the relevant regulatory policies and industry self-regulatory rules that have been issued, so that the short dramas they shoot will not encounter sudden regulatory measures after subsequent distribution and launch. Short drama content should avoid bad orientations such as pornography and vulgarity, blood and violence, low taste, and ugly aesthetics. More importantly, it is best not to involve sensitive political issues, otherwise it can easily touch “bottom lines” and “red lines.”

2. Copyright Infringement Risks and Prevention

(1) Risks

The filming of micro-dramas falls within the creative field, where copyright infringement risks easily arise. Generally speaking, copyright infringement in micro-dramas mainly falls into two categories:

The first category is infringement of the right of adaptation (derivative right). The right of adaptation is the right of the copyright owner to permit or prohibit others from creating works based on his or her own works. Adaptation methods in copyright mainly refer to adaptation, translation, compilation, and cinematographic production. After a work is adapted, if it meets the minimum requirement of originality, an adapted work (also called a derivative work) may be created. The adaptation right in copyright includes the right of adaptation, translation, cinematographic adaptation, compilation, etc. Therefore, if a short drama producer adapts and produces a short drama based on another person’s published work without the author’s permission, and if the short drama is deemed substantially similar to the prior work, it constitutes corresponding copyright infringement.

The second category is infringement of the right of communication. If a micro-drama mini-program and its founding entity, without the permission of the original work’s rights holder, directly copy the content of another person’s work as their own original content, or directly use another person’s work as their own, and publish it on the platform to make a profit, this act may infringe the original work rights holder’s reproduction right, right of information network dissemination, and other rights.

(2) Risk Prevention

Risk prevention for the first category (infringement of derivative rights). Due to the short duration and many plot twists of short dramas, creators have very limited choices in filming. In terms of plot and character event arrangements, it is easy to “collide” with other short dramas. Therefore, short drama producers should try to avoid content homogenization, formulaic patterns, and modularization, and avoid situations where content is nested, themes collide, and plots are similar, thereby reducing the legal risk of copyright infringement.

In addition, some short drama producers do not use original scripts but instead use previously published online novels, or adapt existing IPs into scripts for secondary creation. For example, on December 1, 2022, the author Guanwai Xifeng posted on Weibo that Tencent’s short drama “Return to 1993” plagiarized his novel titled “Return to 1990,” allegedly plagiarizing the background setting, story structure, character settings, and character relationships of the short drama, which were very similar to Guanwai Xifeng’s novel. Guanwai Xifeng demanded that Tencent immediately remove the drama and stop the infringement. Therefore, short drama producers should ensure that IPs are authorized by the original work’s copyright owner, and especially note that they should avoid adapting novels with disputed copyright. At the same time, when obtaining authorization from the novel copyright owner, they should reasonably plan the filming, production, and broadcast period to avoid low-level infringement errors resulting from using the authorization beyond the term.